SEC aims to convince NY Court it must prosecute alleged cryptocurrency scammers
The Court need not preoccupy itself with canards about the supposed crippling of the world’s digital assets markets should it go after PlexCoin and the people behind this scheme, the SEC says.
Some six months have passed since the United States Securities and Exchange Commission (SEC) launched a lawsuit against against alleged cryptocurrency scammers PlexCorps aka PlexCoin, Sidepay.ca, Dominic Lacroix and Sabrina Paradis-Royer over securities law violations. The regulator is now trying to convince the New York Eastern District Court that this is the right institution to prosecute the alleged fraudsters, given the links of PlexCoin with the US and the solicitation of US residents.
As per documents, filed late last week with the New York Eastern District Court, the Commission pushes against the efforts of the defendants to dismiss the case.
The US regulator starts by rebuffing as groundless the claims of the defendants that they should not be prosecuted in the US because they solicited US clients unwittingly. The defendants also insist they were about to return funds to US clients.
The US regulator notes that the defendants’ theory of personal jurisdiction, resting on taking out of context “purposeful” from “purposeful availment,” is that it does not matter that they had contacts with the United States because they “didn’t do it on purpose.” The Commission says that this theory is wrong: what actually happened is what matters, and what happened here, according to SEC, is that the defendants knew they were selling PlexCoin to United States residents.
More precisely, SEC says that the PlexCoin website and Facebook page were accessed by residents of the United States from approximately July 2017 through the present. The PlexCoin Website and PlexCoin Facebook contained information about PlexCoin’s prospects as an investment. Lacroix, one of the key figures behind the fraudulent scheme, admits that to reach “the largest number of people within a very short period of time,” he engaged a Facebook “advertising campaign that targeted North America.”
Furthermore, the defendants placed no geographic restrictions on who could create a profile on the PlexCoin website. In addition, the defendants knew the physical location of users who logged on, because they were tracking IP addresses as reflected in users’ log-in history on their PlexCoin profile.
The US regulator estimates that, in all, PlexCoin and the people behind it raised more than US$3.4 million through the accounts which reflect investor billing addresses—Stripe, Square, and Wave. These amounts include approximately $1 million from United States investors.
The defendants argue that the investors had to click on the check boxes to create a profile on the PlexCoin website or receive emails encouraging them to purchase PlexCoin. For some period, but not the entire time frame, investors saw the check boxes before proceeding to the PlexCoin purchase page. In any case, Lacroix admits that the defendants knew that the check boxes were not working because United States residents were purchasing PlexCoin despite them. Indeed, the evidence indicates that the terms and conditions were amended to remove the supposed prohibition of United States investors just a week or two into the nine-week PlexCoin ICO because it was “causing a lot of confusion.”
SEC seeks to establish that the defendants maintained sufficient contacts with the US so that they can be prosecuted there. According to the US regulator, the evidence shows that Defendants:
offered and sold PlexCoin to United States residents via a website through which they transmitted numerous digital messages, including statements (which the SEC contends were fraudulent) about PlexCoin, solicitations for purchases, confirmations of purchases, and digital representations of PlexCoin itself; and
utilized various accounts with vendors in the United States to commit these acts, including in Paradis-Royer’s case through SidePay’s payment portal.
Finally, the regulator slams the defendants attempt to invoke the prospect of “an incredibly bad social policy outcome” should the Court exercise jurisdiction—the supposed crippling of the world’s digital assets markets.
”This non sequitur suggests it would be preferable for would-be securities peddlers and/or fraudsters using modern technology to inundate American financial markets with (fraudulent) products by simply moving their servers offshore. The Court need not preoccupy itself with these canards”, says the US regulator.
The case is captioned Securities and Exchange Commission v. PlexCorps (1:17-cv-07007).
