Archive

September 30, 2019

Longfin Corporation has been ordered to pay $6.8 million in a default judgment entered in a federal court case alleging that Longfin filed fraudulent papers to qualify for a public offering under Regulation A+, misrepresenting the business as being based in the U.S.  In addition, Longfin reported fictitious revenue from sham commodities transactions and unlawfully distributed Longfin shares, including in unregistered transactions and to insiders and affiliates.  SEC

June 6, 2019

The SEC has filed a federal court action against Kik Interactive, Inc. The company, which previously offered an online messaging application, raised more than $100 million through the sale of "Kin" tokens, an unregistered digital asset.  Kik marketed the Kin cryptocurrency as an investment which would trade on secondary markets, and which Kik would incorporate in its messaging platform, creating a Kin transaction network both on and off the messaging platform.  According to the SEC's complaint, these Kik platforms did not, in fact, exist.  Kik did not comply with securities registration requirements in offering the Kin tokens for sale, and the SEC alleges that in failing to do so, Kik violated Section 5 of the Securities Act of 1933.  SEC

March 11, 2019

Marshall Islands-based 1pool Ltd. and its chief executive officer and owner, Patrick Brunner, will pay $990,000 to resolve a CFTC action alleging that they illegally offered retail commodity transactions that were margined in bitcoin, failed to register as a futures commission merchant (FCM), and failed to have required anti-money laundering procedures in place. The settlement payment consists of a $175,000 civil monetary penalty, disgorgement of $246,000 in gains, and restitution of approximately $570,000 to U.S. customers.  CFTC

November 29, 2018

Professional boxer Floyd Mayweather Jr. and music producer DJ Khaled have settled SEC charges that they promoted initial coin offerings (ICOs) by Centra Tech Inc. without making required disclosures about payments they received from Centra Tech.  Mayweather agreed to pay disgorgement, penalties, and interest totaling $614,775, and Khaled agreed to pay a total of $152,725. SEC

November 16, 2018

CarrierEQ Inc. (Airfox) and Paragon Coin Inc. have agreed to pay civil penalties of $250,000 each to resolve charges that they conducted initial coin offerings (ICOs) in 2017 without registering the ICOs pursuant to federal securities laws.  Airfox's offering had raised $15 million and Paragon had raised $12 million.  The companies also agreed to provide compensation to harmed investors and to register their tokens as securities.  SEC

November 8, 2018

Zachary Coburn, the founder of EtherDelta, a digital "token" trading platform, settled SEC charges that the platform operated as an unregistered exchange.  Over an 18-month period, EtherDelta's users executed more than 3.6 million orders for ERC20 tokens, including tokens that are securities under the federal securities laws.  Because it was functioning as an online national securities exchange, EtherDelta was required to register with the SEC or qualify for an exemption.  Coburn consented to the order and agreed to pay $300,000 in disgorgement plus $13,000 in prejudgment interest and a $75,000 penalty.  SEC

July 9, 2018

The CFTC announced Dillon Michael Dean and The Entrepreneurs Headquarters Limited (TEH) were ordered to pay over $1.9 million in civil monetary penalties and restitution for defrauding their customers. Dean and TEH solicited at least $499,264.04 worth of Bitcoin from 127 customers by falsely promising to convert the Bitcoin into fiat currency that would be invested in a pooled investment vehicle for trading commodity interests. At least 120 customers suffered total losses of $432,184.79 as a result of Defendants’ fraud. CFTC

May 29, 2018

The SEC announced it has obtained a court order halting an ongoing fraud involving an initial coin offering (ICO) that raised as much as $21 million from investors in and outside the U.S. The court also approved an emergency asset freeze and the appointment of a receiver for Titanium Blockchain Infrastructure Services Inc., the firm behind the alleged scheme. An SEC complaint unsealed today charges that Titanium President Michael Alan Stollery, a/k/a Michael Stollaire, a self-described “blockchain evangelist,” lied about business relationships with the Federal Reserve and dozens of well-known firms, including PayPal, Verizon, Boeing, and The Walt Disney Company. The complaint alleges that Titanium’s website contained fabricated testimonials from corporate customers and that Stollaire publicly – and fraudulently –claimed to have relationships with numerous corporate clients. The complaint alleges that Stollaire promoted the ICO through videos and social media and compared it to investing in “Intel or Google.” SEC

April 20, 2018

The SEC announced additional fraud charges stemming from an investigation of Centra Tech Inc.’s $32 million initial coin offering. In an amended complaint filed today, the SEC charged one of Centra’s co-founders, Raymond Trapani, in a fraudulent scheme related to Centra’s 2017 ICO, in which the company issued “CTR Tokens” to investors. Earlier this month, the SEC and criminal authorities charged Centra’s two other co-founders, Sohrab “Sam” Sharma and Robert Farkas, for their roles in the scheme. The SEC’s amended complaint alleges that Trapani was a mastermind of Centra’s fraudulent ICO, which Centra marketed with claims about nonexistent business relationships with major credit card companies, fictional executive bios, and misrepresentations about the viability of the company’s core financial services products. The amended complaint further alleges that Trapani and Sharma manipulated trading in the CTR Tokens to generate interest in the company and prop up the price of the tokens. SEC

April 6, 2018

The SEC has obtained a court order freezing more than $27 million in trading proceeds from allegedly illegal distributions and sales of restricted shares of Longfin Corp. stock involving the company, its CEO, and three other affiliated individuals. According to a complaint unsealed today in federal court in Manhattan, shortly after Longfin began trading on NASDAQ and announced the acquisition of a purported cryptocurrency business, its stock price rose dramatically and its market capitalization exceeded $3 billion. The SEC alleges that Dorababu Penumarthi, Suresh Tammineedi, and their co-conspirators then illegally sold large blocks of their restricted Longfin shares to the public while the stock price was highly elevated. Through their sales, Penumarthi, Tammineedi, and others collectively reaped more than $27 million in profits. SEC