Crypto “guru” Reginald Middleton asks for more time to respond to SEC’s complaint
The parties have been engaged in discussions concerning a potential resolution of the case, says Middleton who is accused of making material misrepresentations about the offering of digital assets called “VERI Tokens”.
As the proceedings launched by the United States Securities and Exchange Commission (SEC) against self-described financial guru Reginald Middleton and his companies Veritaseum, LLC and Veritaseum, Inc., continue at the New York Eastern District Court, the defendants have asked for more time to respond to the SEC’s allegations.
Today, counsel for the defendants filed a document with the Court, requesting that the defendants’ time to respond to the complaint be extended from November 4, 2019, to and including December 4, 2019. The Counsel notes that the parties have been engaged in ongoing discussions concerning a potential resolution of the case. The SEC did not oppose the defendants’ request.
Let’s recall that the US regulator has also confirmed that it is engaged in settlement talks with the defendants.
In this lawsuit, the defendants are alleged to have raised $14.8 million by making material misrepresentations and omissions about the unregistered securities they offered: digital assets called “VERI Tokens,” “VERI,” or “Veritas.” The defendants are said to have conducted this offering in a so-called initial coin offering (ICO) that took place from April 25, 2017 to May 26, 2017, and in post-ICO offers and sales.
According to the SEC’s Complaint, the defendants knowingly misled investors about their prior business venture and the use of offering proceeds; touted outsized investor demand for VERI; and claimed to have a product ready to generate millions of dollars of revenue, when no such product existed; placed a series of manipulative trades in VERI Tokens to increase their price and to induce investors to buy more tokens; and misappropriated investor assets beginning during the ICO phase of the offering.
To avoid the federal securities laws’ registration requirements, Middleton attempted to refashion VERI variously as “pre-paid fees” or “software,” and likened them to gift cards. To encourage purchases during the ICO phase of the offering, the defendants told potential investors that Veritaseum had products ready to go to market that would replace brokers, banks, and hedge funds. These statements were all false. There were no products “ready to ship” or that would net millions in revenue or replace financial institutions.
Moreover, after the ICO phase, Middleton placed a series of secret, manipulative trades in VERI on a digital asset platform, artificially increasing VERI’s price by approximately 315% during just one day of trading. He then touted these price increases and returns to VERI holders, stating, for example, that because VERI was “up 33.51x from its April 25th initial sales price, some prescient folk are quite happy.” Middleton also misappropriated for his own personal and undisclosed use at least $520,000 of the amounts raised in the Offering.
The SEC notes that the Offering was illegal, as there was no registration statement filed or in effect for the offers and sales of VERI, and no exemption from registration applied.