As the cryptocurrency ecosystem comes closer to a boom in decentralized finance (DeFi), it might be prudent to remember the initial coin offering (ICO) mania and the price that many investors paid for being maybe too trusting, greedy, and illiterate.
It comes as no surprise that fraudulent activities in the cryptocurrency sphere continue to run amok and the Securities and Exchange Commission has the quite impossible task of showing criminals there are consequences to their actions. Only a handful gets caught, which may even motivate potential fraudsters based on a simple risk-reward analysis.
Today, three individuals were charged by the SEC for defrauding hundreds of retail investors out of more than $11 million through two fraudulent and unregistered digital asset securities offerings. This has allegedly taken place from late 2017 through May 2018. The commission is charging Kristijan Krstic, founder of Start Options and Bitcoiin2Gen, and John DeMarr, the primary U.S.-based promoter for these companies, for inducing investors to buy digital asset securities in their unregistered initial coin offering (ICO) of B2G tokens.
The complaint alleges the promoters, Robin Enos and DeMarr, falsely claimed that the B2G tokens would be deliverable on the Ethereum blockchain, that the invested funds would be used to develop a coin that was “mineable,” and that the tokens would be tradeable on a proprietary digital asset trading platform in early April 2018. In reality, the claims about the B2G tokens were false, Bitcoiin2Gen was a sham, and Krstic and DeMarr allegedly misappropriated millions of dollars of investor funds for their own personal benefit, according to the SEC. Oddly enough, Start Options was not “the largest Bitcoin exchange in euro volume and liquidity” despite their claims of them being “consistently rated the best and most secure Bitcoin exchange by independent news media.”
Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, said: “The conduct alleged in this action was a blatant attempt to victimize those interested in digital asset technology and these defendants should be held accountable. In reality, we allege, these ventures were fraudulent enterprises aimed simply at misappropriating funds from investors.”
The SEC is charging Krstic and Demarr with fraudulent activities and Enos with aiding and abetting those activities. The accused will probably end up paying injunctive relief, disgorgement plus interest, penalties, as well as facing an officer-and-director bar.
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“These rates are designed to provide traders, institutions and other users transparency and price discovery across a much broader range of tokens, allowing them to confidently and more accurately value cryptocurrency sector specific portfolios and manage price risk around various blockchain-based projects.”