InfoBytes Blog
SEC files emergency action on $100 million crypto fraud
On March 6, the SEC announced it had filed an emergency action against a Miami-based investment adviser and one of its principals (collectively, “defendants”) in connection with a $100 million crypto asset fraud scheme. According to the SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, the defendants allegedly promised investors that their money would be primarily used to trade crypto assets and would generate returns through separately managed accounts and five private funds. The SEC alleged, however, that the defendants “disregarded the [funds’] structure, commingled investor assets, and used over $3.6 million to make Ponzi-like payments to fund investors.” Moreover, the SEC claimed that the defendants falsely represented that one of the funds received an audit opinion from a “top four auditor,” when in fact none of the funds ever received an audit opinion. The individual defendant also allegedly misappropriated investor money for personal use and provided altered documents with inflated bank account balances to a third-party administrator of some of the funds.
The SEC’s complaint alleges violations of the antifraud provisions of the federal securities laws and seeks permanent injunctions, disgorgement, prejudgment interest, and civil money penalties. The SEC is also seeking an officer and director bar and conduct-based injunction against the individual defendant. Additionally, the complaint includes a list of “relief defendants” and seeks disgorgement from each of the funds and from another entity that allegedly received approximately $12 million from the defendants and the funds. The announcement noted that the SEC successfully received an asset freeze, appointment of a receiver, and other emergency relief against the defendants.