Cryptocurrency

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

April 2, 2018

The SEC charged Sohrab “Sam” Sharma and Robert Farkas two co-founders of a purported financial services start-up with orchestrating a fraudulent initial coin offering (ICO) that raised more than $32 million from thousands of investors last year. Criminal authorities separately charged and arrested both defendants. The SEC's complaint alleges that Sharma and Farkas, co-founders of Centra Tech. Inc., masterminded a fraudulent ICO in which Centra offered and sold unregistered investments through a "CTR Token." Sharma and Farkas allegedly claimed that funds raised in the ICO would help build a suite of financial products. They claimed, for example, to offer a debit card backed by Visa and MasterCard that would allow users to instantly convert hard-to-spend cryptocurrencies into U.S. dollars or other legal tender.  In reality, the SEC alleges, Centra had no relationships with Visa or MasterCard. The SEC also alleges that to promote the ICO, Sharma and Farkas created fictional executives with impressive biographies, posted false or misleading marketing materials to Centra’s website, and paid celebrities to tout the ICO on social media. SEC

February 21, 2018

The SEC charged BitFunder and its founder Jon E. Montroll with operating an unregistered securities exchange and defrauding users of that exchange.  The SEC also charged the operator with making false and misleading statements in connection with an unregistered offering of securities. The SEC alleges that BitFunder and its Montroll operated BitFunder as an unregistered online securities exchange and defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 bitcoins. The SEC also alleges that Montroll sold unregistered securities that purported to be investments in the exchange and misappropriated funds from that investment as well. SEC

February 16, 2018

The SEC announced the suspension  of trading in three companies due to similar statements made about the acquisition of cryptocurrency and block-chain technologhy assets. The three companies affected by the suspension are Cherubim Interests, Inc., PDX Partners, Inc., and Victura Construction Group, Inc. All three companies had made statements about acquiring AAA-rated assets in cryptocurrency and blockchain technology with one of the companies (Cherubim) announcing a financing commitment for an initial coin offering. The SEC determined there were questions as to the accuracy of the nature of the companies’ business and value of their assets as reported in press releases. SEC