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SEC Halts $21 Million Fraud Coin Offering with Emergency Court Order

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SEC Halts $21 Million Fraud Coin Offering with Emergency Court Order

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The United States Securities and Exchange Commission (SEC) has obtained a court order to terminate an initial coin offering (ICO) that has been deemed as fraudulent.

The alleged company, Titanium Blockchain Infrastructure Services (TBIS), and its president Michael Stollaire are accused of violating federal securities laws with a USD 21 million crowdfunding round between late November 2017 and through to “at least” 25 January 2018.

False advertising, financial foul play

According to the SEC complaint filed on 22 May the USD 21 million raised comprised of Ethereum and Bitcoin as well as cash from “dozens of investors” across approximately 18 states and abroad.

TBIS and Stollaire are also accused of promoting fake business relationships with huge companies like PayPal, Verizon, Disney, and Apple; additionally, the self-described “blockchain evangelist” stands accused of claiming to have a business relationship with the Federal Reserve.

The complaint goes on to detail that shortly after the completion of the ICO in February 2018, Stollaire and TBIS were receiving contact from some of the companies who claimed to be in partnership with the project; they made demands that TBIS stop referencing the companies and using their logos.

Robert A Cohen, chief of the SEC enforcement division’s cyber unit said: “This ICO was based on a social media marketing blitz that allegedly deceived investors with purely fictional claims of business prospects. Having filed multiple cases involving allegedly fraudulent ICOs, we again encourage investors to be especially cautious when considering these as investments.”

Stollaire is also alleged to have “commingled some of the ICO investors’ funds with his personal fund”, using some of the funds raised for expenses that are entirely unrelated to TBIS, including personal credit card payments and bill payments for his Hawaii condominium.

As well as having the court order to halt the Titanium ICO and an emergency asset freeze, the SEC will be seeking to retrieve the funds with interest and additional penalties, as well as to place a ban on Stollaire prohibiting him from participating in offering digital securities.

The SEC stance

The SEC is commonly perceived to have quite a strict and skeptical stance when it comes to cryptocurrencies and ICOs, with a lack of clarity as yet with how to classify and regulate the industry. However, the SEC is proactively engaging with members of public and private sectors, openly discussing the possible outcomes and current status of the emerging industry.

The SEC is hosting an Investor Conference in late June which invites crypto-community members to come and shed light on the industry and its evolution with all five SEC commissioners. The SEC has released an educational “ICO scam” website, demonstrating what a hoax ICO should look like.

 

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