Cryptocurrency

May 19, 2022

Sohrab “Sam” Sharma, Robert Farkas, and Raymond Trapani will disgorge over $40 million for raising more than $32 million from investors in their unregistered ICO of “CTR tokens” through their controlled entity, Centra Tech Inc. The fraudsters made material misrepresentations in their marketing of the tokens, including claiming partnerships with Visa, MasterCard, and The Bancorp; created fake executive bios; misrepresented the company’s viability; and manipulated trading in the tokens to generate interest. The three defendants have been sentenced to imprisonment in addition to the financial penalties levied. SEC

May 6, 2022

NVIDIA Corporation has agreed to a cease-and-desist order and to pay a $5.5 million penalty for violations of the Securities Act and the disclosure provisions of the Securities Exchange Act. NVIDIA failed to disclose cryptomining as a significant element of its material revenue growth, depriving investors of critical information related to the investment’s volatility. SEC

March 10, 2022

The founders of cryptocurrency company Bitqyck, Bruce Bise and Samuel Mendez, have been sentenced to 8 years in prison for tax evasion, two years after an $8 million settlement with the SEC for charges of defrauding over 13,000 investors of $24 million.  According to the DOJ press release, Bise and Mendex each diverted over $4 million of investor funds for personal expenses, then underreported their income and failed to file corporate tax returns for Bitqyck.  USAO NDTX

February 14, 2022

BlockFi, Inc. will pay a total of $100 million to resolve SEC and state claims arising from its sale to retail customers of cryptocurrency lending products, including its BlockFi Interest Accounts.  Through the “BIAs,” investors lent cryptocurrency assets to BlockFi in exchange for the company’s promise to provide a variable monthly interest payment.  The SEC alleged that the BIAs were securities, offered without registration, that BlockFi operated as an unregistered investment company, and made false and misleading statements about risk levels. The total settlement includes a $50 million SEC civil penalty and $50 million to be divided equally between U.S. jurisdictions that are members of North American Securities Administrators Association.   SEC; NASAA

October 15, 2021

iFinex Inc. and related entities doing business as cryptocurrency trading platform Bitfinex, agreed to pay $1.5 million to resolve charges that they operated as an unregistered futures commission merchant (FCM) and engaged in illegal, off-exchange retail commodity transactions in digital assets with U.S. persons that were not eligible contract participants (ECPs).  The CFTC found that Bitfinex allowed margin trading financed through a peer-to-peer funding program through which Bitfinex customers who held fiat or cryptocurrency in their Bitfinex account would “lend” those funds to other Bitfinex customers who would then use those funds to buy, sell, and trade on the Bitfinex platform, in violation of a 2016 CFTC order.  CFTC

October 15, 2021

Tether Holdings Limited and related entities, issuers of the “Tether Token” or USDt, have agreed to pay a civil monetary penalty of $41 million to resolve allegations that they violated the CEA and CFTC regulations by making untrue or misleading statements and/or omitting material facts through statements that Tether maintained sufficient U.S. dollar and other fiat currency reserves in bank accounts to back every USDt in circulation.  In fact, Tether did not hold sufficient currency reserves at all times.  The reserves were inadequate in amount, and were not held in currency in bank accounts, but instead included unsecured receivables and non-fiat assets, which were held by unregulated entities and third-parties including Bitfinex, which commingled reserve funds with operational and customer funds.  The CFTC also found that Tether failed to perform routine professional audits as represented.  CFTC