SEC Hits Another Fraudulent ICO

May 31

On May 29 the Securities and Exchange Commission (“SEC”) announced it had obtained a court order halting the ICO of BAR, a coin developed by Michael Stollery, commonly known as Michael Stollaire, and his firm Titanium Blockchain Infrastructure Services.  The SEC also obtained an order approving an emergency asset freeze and the appointment of a receiver for Titanium Blockchain.

In its complaint, the SEC alleged that Stollaire lied about business relationships with the Federal Reserve and an endless string of well-known companies, including PayPal, Boeing, and The Walt Disney Company.  Stollaire went all-in on the fantasy, publishing fabricated testimonials and comparing investing in BAR to investing in Intel or Google.

The SEC cited Stollaire’s misrepresentations in alleging violations of Section 10b of the Exchange Act, which prohibits the use of manipulative and deceptive devices in connection with the purchase and sale of securities.  In particular, Robert Cohen, Chief of the SEC Enforcement Division’s Cyber Unit, said that “this ICO was based on a social media marketing blitz that allegedly deceived investors with purely fictional claims of business prospects.”

It is also noteworthy that the SEC is continuing to use its broad antifraud tools to pursue deceitful ICOs.  We’ve previously noted that Chairman Clayton is on the record saying that ICOs are effectively securities.  In this regard, Section 10b, and rule 10b-5 thereunder, are workhorse legal tools used by the SEC to curb all manner of securities fraud, from your standard misrepresentations to insider trading.  To see them continually popping up in SEC enforcement actions is a strong statement of intent.

David Zaslowsky has a degree in computer science and, before going to Yale Law School, was a computer programmer. He is currently the Chairman of the Litigation Department of the firm’s New York office. His practice focuses on international litigation and arbitration. He has been involved in cases in trial and appellate courts across the United States and before arbitral institutions around the world. Many of David’s cases, including some patent cases, have related to technology. Since 2008, David has been included in Chambers for his expertise in international arbitration.
Patrick Dennien is an associate in the Firm’s Washington, DC office. He practices in white collar crime and corporate investigations, sanction systems of international organizations, money laundering risk and AML regulation, cryptocurrency risk and regulation, and corporate compliance programs. Prior to joining the Firm, Patrick worked for the World Bank’s anti-corruption arm, where he assessed the compliance programs of multinational companies, and advised on the development and implementation of effective compliance programs.