U.S. SEC Charges Two With Illegal Sales of Blockchain Company Stock

July 05

On July 2, the U.S. Securities and Exchange Commission charged two men with the illegal sale of securities related to UBI Blockchain Internet, Ltd. (“UBIB”).  The SEC alleges that T.J. Jesky and Mark F. DeStefano made approximately USD 1.4 million by selling shares in UBIB over a 10-day period in December 2017 and January 2018.  The sales stopped when the SEC temporarily suspended trading in UBIB stock earlier this year due to concerns about the accuracy of assertions in its SEC filings and unusual and unexplained market activity.

The SEC’s complaint alleges that Jesky, and DeStefano received 72,000 restricted shares of UBIB stock in October 2017 and were permitted to sell the shares at a fixed price of $3.70 per share under the registration statement.  Instead, Jesky and DeStefano unlawfully sold the shares at much higher market prices – ranging from $21.12 to $48.40 – when UBIB’s stock experienced an unusual price spike.  Without admitting or denying the allegations, Jesky and DeStefano agreed to return the ill-gotten gains, pay USD 188,682 in penalties, and be subject to permanent injunctions.   The settlement is subject to the court’s approval.

The press release that the SEC issued about the case contained another warning to public retail investors to be cautious before buying stock in companies that suddenly claim to have a blockchain business.  As we reported earlier, in order to educate the public, the SEC has gone as far as to create a mock website that offered a phony ICO.

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.