PlexCorps’ Facebook accounts instrumental in furthering ICO scam – US Court concludes

Maria Nikolova

Judge Carol Bagley Amon of the New York Eastern District Court says that PlexCorps and the individuals behind it continuously and deliberately exploited the US market of Facebook users.

There has been substantial chatter about Facebook’s policy regarding cryptocurrency advertising. On the face of it, it is all about what the social network and its team decide – if they allow such ads, the people and entities behind them may safely continue to do what they are doing. However, the most recent developments in a cryptocurrency fraud case launched by the United States Securities and Exchange Commission (SEC) show that accounts to Facebook that are used to promote cryptocurrencies, initial coin offerings (ICOs) and related activities, may be important in prosecution of fraud cases.

As FinanceFeeds has reported, in December 2017, the Commission brought an emergency action against PlexCorps (a/k/a and d/b/a PlexCoin and, Dominic Lacroix, and Sabrina Paradis-Royer. The SEC generally contends that the defendants unlawfully participated in a fraudulent fundraising scheme to amass more than $15 million from tens of thousands of investors who purchased certain “cryptocurrency” called “PlexCoin Tokens,” or PlexCoin.

On Thursday, August 9, 2018, an order issued by Judge Carol Bagley Amon of the New York Eastern District Court denied the defendants’ motion to dismiss for lack of personal jurisdiction.

The Order, seen by FinanceFeeds, notes that the contacts that the defendants had in the United States are sufficient for the SEC case to continue in New York.

PlexCorps and the individuals behind it employed numerous online communications to solicit potential buyers of PlexCoin. During its investigation, the SEC discovered that the defendants relied heavily on the United States-based Facebook. The agency found at least three relevant Facebook accounts.

  • One account allegedly announced the ICO and Whitepaper and posted several statements about PlexCoin, the ICO, and the development team.
  • Another Facebook account allegedly described a payment method for purchasing PlexCoin, future PlexCoin-related projects, and the “tradability of PlexCoin Tokens on digital asset exchanges.”
  • A third Facebook account touted PlexCoin and sold related t-shirts.

In addition, the SEC provided two sworn declarations from two PlexCoin purchasers in the United States who stated that they learned about the sale from the Facebook accounts.

The agency also proffered a sworn declaration by Antoine Richard, a former PlexCoin employee who managed social-media communications for PlexCoin during most of the pre-sale and sometimes communicated with United States-based individuals about the assets. Richard declared that “everyone involved with the PlexCoin project understood that people from all over the world purchased PlexCoin, including from the United States.”

The Facebook accounts were integral to finding investors and directing statements at them to encourage them to participate in the alleged fraudulent scheme. The accounts announced, among other things, details of PlexCoin, the ICO, the Whitepaper, and the development team, the Judge noted in her Order.

“In light of these messages and the material PlexCoin information they contain, the Facebook accounts were instrumental to the Individual Defendants in furthering their alleged fraudulent scheme”, the Judge said.

The Whitepaper emphasizes that PlexCoin’s “marketing strategy” was to “focus.. efforts on Facebook,” and that Facebook was the defendants’ “main ally” in making PlexCoin known to the “highest number of people possible.”

According to the Judge, the record reasonably shows that Lacroix and Paradis-Royer “knowingly used Facebook marketing to disseminate their messages into the United States – that is, they continuously and deliberately exploited the United States market of Facebook users”.

The Court recognizes that merely creating a Facebook account does not support jurisdiction in all cases. However, the individual defendants’ conduct is far more extensive.

Thus, for instance, the defendants used a number of websites to solicit US customers. In light of the interactivity of and Lacroix’s intentional enticement of United States-based investors, Lacroix established significant Internet contacts with the United States.

Furthermore, around the start of the ICO pre-sale (August 7, 2017) Lacroix and Paradis-Royer, who claim to be residents of Canada, took a trip to Boston. In his declaration, Lacroix emphasized that the trip was for “leisure”. However, the SEC provided evidence indicating that the trip was related to PlexCoin.

Finally, the Court notes that the defendants employed several United States-based payment services for the pre-sale: PayPal, Square, Stripe, and Kraken. In total, the one Paypal, two Square, and two Stripe accounts helped the defendants finalize 14,074 sales, totaling more than $3.6 million. Nearly 90% of those sales were made in United States dollars; more than 25% to United States buyers. Also, from August 17, 2017, to December 4, 2017, the two Kraken accounts received about $1.04 million in cryptocurrency from the PlexCoin ICO sales.

The Court concluded that the Individual Defendants created contacts with the United States by, among other things, doing business while traveling in the United States, utilizing United States-based payment services, and marketing their products to United States consumers via the Internet.

The case, captioned Securities and Exchange Commission v. PlexCorps (1:17-cv-07007), continues at the New York Eastern District Court.

Read this next

Institutional FX

Invast Global ramps up its offering with 10 soft commodity CFDs

Sydney-based prime-of-prime provider Invast Global has expanded its offering with the addition of ten soft commodity CFDs, which increases their index and commodity CFD offering to 35 instruments.

Retail FX

FF Simple and Smart Trades says Goodbye to CySEC authorization

The Cyprus Securities and Exchange Commission (CySEC) confirmed that it has wholly withdrawn the Cyprus Investment Firm (CIF) licenses of FF Simple and Smart Trades Investment Services Ltd.

Crypto Insider

Shining the Light in Crypto’s Dark Places

Something changed in regulators’ minds after the November crash of the FTX crypto exchange.

Executive Moves

Financial Commission Adds Sam Low to Dispute Resolution Committee

The Financial Commission (FinaCom PLC), a dispute resolution service that caters to the financial services industry, has appointed Sam Low as the newest member of its Dispute Resolution Committee (DRC).

Digital Assets, Uncategorized

De-facto owner of Bithumb exchange arrested in South Korea

South Korean prosecutors have arrested Kang Jong-Hyun, the anonymous chairman and owner of the country’s largest cryptocurrency exchange, Bithumb, on charges of embezzlement and stock manipulation.

Retail FX

Interactive Brokers volumes snap three-month losing streak

Electronic brokerage firm Interactive Brokers LLC (NASDAQ:IBKR) said its trading volumes rose in January, an indication that investor confidence in the financial markets is rebounding after having been fairly mixed over the past few months.

Digital Assets

VVF invests $5 million in Everscale, a potential Layer 2 solution for Venom blockchain

“For us, this is a strategic investment aimed at the technological development of projects and teams around technologies that we focus on and actively develop. In particular, we are talking about the Venom blockchain project and its ecosystem, which is planned to be launched soon and for which Everscale is a potential Layer 2 solution.”

Institutional FX

FXSpotStream volume ends string of declines on January rebound

Trading volumes on institutional FX platforms surged in January as traders increased their bets on central bankers’ policy with evidence mounting that inflation and economic growth are both losing momentum.

Industry News

DeFi firm Aurox launches SEC-compliant crowdfunding campaign on tZERO

“This is a great opportunity for us to raise capital from our community and the broader public on a leading fully regulated platform. We are confident that the tZERO Markets platform will provide us with the exposure and reach we need to attract a diverse investors to support our business growth.”