On November 8, the SEC settled charges against Zachary Coburn, the founder of EtherDelta, a digital token trading platform. This is the SEC’s first enforcement action against an entity for operating as an unregulated national securities exchange. Mr. Coburn consented to the SEC’s order and agreed to pay $300,000 in disgorgement, $13,000 in prejudgment interest, and a $75,000 penalty. In its order, the SEC concluded that EtherDelta’s trading system met the definition of “exchange” under…
Last week we reported that the US SEC stopped a fraudulent ICO that falsely claimed that it had SEC approval. Yesterday, the SEC suspended trading in the securities of a company amid questions surrounding its statements about partnering with a claimed SEC-qualified custodian for use with cryptocurrency transactions and a purportedly registered public offering of preferred stock. The SEC’s trading suspension order says that two August 2018 press releases issued by Nevada-based American Retail Group,…
On October 10, CipherTrace – a developer of cryptocurrency AML, bitcoin forensics, and blockchain threat solutions – released its Cryptocurrency Anti-Money Laundering Report – Q3 2018 (the “Report”). The Report analyzed 45 million bitcoin transactions involving the top 20 global cryptocurrency exchanges to produce some sobering findings regarding the level of criminal activity at crypto exchanges and the effectiveness of AML regulation. Some key findings are summarized below. 97% of bitcoin payments made directly from…
The U.S. SEC announced yesterday that it had stopped what sounds like the most brazen fake ICO yet. According to the complaint, Blockvest LLC not only falsely claimed that it had obtained SEC approval, it also used the SEC seal without permission (a violation of federal law) and promoted the ICO with a fake agency called the “Blockchain Exchange Commission” (using a graphic similar to the SEC’s seal and the same address as SEC headquarters).…
On September 27, the US Securities and Exchange Commission (SEC) filed charges against an international securities dealer and its Austria-based CEO for allegedly violating the federal securities laws in connection with security-based swaps funded with Bitcoins. According to the SEC’s Complaint, 1pool Ltd. a/k/a 1Broker, registered in the Republic of the Marshall Islands, and its CEO Patrick Brunner, solicited investors from the United States and around the world to buy and sell security-based swaps.  Investors…
Texas has been one of the more active US states in combating fraudulent ICOs and cryptocurrency scams. Earlier this week it took three separate actions. According to the Emergency Cease and Desist Order, Coins Miner Investment Ltd. manipulates its email solicitations to make them appear as if they came from Coinbase, a well-known San Francisco-based online cryptocurrency platform. Ana Julia Lara, a person affiliated with Coins Miner, falsely claims to work at Coinbase as a cryptocurrency…
Last week we reported that FINRA brought its first-ever disciplinary action in the cryptocurrency space. But there were also two other first-of-their-kind enforcement actions last week by the U.S. SEC. On September 11, the SEC announced its first-ever enforcement action finding an investment company registration violation by a hedge fund manager based on its investments in digital assets. The SEC entered an Order finding that Crypto Asset Management LP (“CAM”) offered a fund that operated…
On Tuesday, September 11, a New York Federal Judge rejected a defendant’s argument that he cannot be prosecuted because the digital coins he sold were not securities. Maksim Zaslavskiy is accused of making materially false and fraudulent representations in connection with two investment schemes and ICOs for REcoin Group Foundation, LLC (“REcoin”) and DRC World, Inc. (“Diamond”). Zaslavskiy claimed that REcoin and Diamond did not involve securities and were therefore beyond the reach of the…
On Tuesday, September 11, the Financial Industry Regulatory Authority (“FINRA”) took its first disciplinary action against an industry professional, charging a broker, Timothy Tilton Ayre, with securities fraud and the unlawful distribution of an unregistered cryptocurrency security, HempCoin. FINRA’s complaint alleges that Ayre attempted to lure public investment in his public company, Rocky Mountain Ayre, Inc., by issuing and selling HempCoin. Ayre made a host of fraudulent statements about his company’s business and finances, as…
On August 22, the Securities and Exchange Commission (“SEC”) issued three separate orders rejecting multiple applications which would have allowed the listing and trading of Bitcoin exchange-traded funds (“ETFs”). Two of the orders involved NYSE Arca, Inc., an exchange headquartered in Chicago.  NYSE Arca submitted proposed rule changes which would allow it to list shares on behalf of two Proshares ETFs and five Direxion ETFs. The third order involved a proposed rule change by the…