SEC accuses crypto companies of $37 million scheme

Courts Securities Digital Assets SEC Enforcement Cryptocurrency Fintech

On September 30, the SEC filed a complaint in the U.S. District Court for the Southern District of Florida against two cryptocurrency companies and their principals (collectively, “defendants”) claiming that they falsely promised investors that their cryptocurrency was backed by a $10 billion gold bullion investment. According to the complaint, the SEC alleged that between May 2018 and January 2019, the defendants “made material misrepresentations and omissions to investors while they were offering and selling [a crypto asset that the companies owned and controlled] in a series of news and press releases issued to the public." The releases falsely claimed that one of the cryptocurrency companies had acquired and received title to $10 billion in gold bullion and intended to back each token that was owned and controlled by the companies issued and sold to investors with $1.00 worth of this gold. One of the companies claimed to have acquired the gold through a purchase transaction with one of the principles and his company. The defendants also misrepresented that independent accounting firms had performed an “audit” of the gold and verified its existence. In reality, the gold acquisition transaction was a sham. The SEC’s complaint alleged violations of anti-fraud and securities registration provisions of the federal securities laws. The SEC is seeking permanent injunctive relief, disgorgement plus prejudgment interest, civil penalties and officer-and-director bars against the individual defendants.