SEC admits problems with freezing orders for cryptocurrencies - FinanceFeeds

SEC admits problems with freezing orders for cryptocurrencies

SEC admits that there exists no central authority on which the regulator may serve freeze orders for cryptocurrencies in a case targeting cryptocurrency scheme PlexCoin.

The United States Securities and Exchange Commission (SEC) has reported problems with freezing orders for cryptocurrencies as loopholes in the oversight of this market segment start to become apparent.

The problems were reported in a Letter to Hon. Carol Bagley Amon, assigned to a case brought by the SEC against PlexCorps, doing business as PlexCoin and Sidepay.ca. The Letter, submitted on January 5, 2018, is filed in response to allegations that the Commission “engaged in tremendous overreach” by taking to court Dominic Lacroix and Sabrina Paradis-Royer, the individuals behind the entities in question who are accused of defrauding investors of $15 million via initial coin offering (ICO) scams.

In its Letter, the SEC notes that the “Defendants in the case were ordered to produce an accounting detailing the status of investor funds, information to which the Commission does not have access and which is especially important given that certain funds were obtained via cryptocurrencies”.

Although Defendants are bound by this Court’s orders that those funds not be dissipated, there exists no central authority (like with respect to Defendants’ bank accounts) on which the Commission may serve freeze orders for cryptocurrencies”, SEC says.

As a result, the Commission cannot guarantee that the victims’ funds are not being dissipated.

The SEC objects to Dominic Lacroix and Sabrina Paradis-Royer’ allegations that the case brought by the SEC against them should be dismissed for lack of personal jurisdiction. The US regulator notes that there were United States purchasers of PlexCoin and that there over 1,500 transactions with investors located in the United States. This is seen as sufficient to confer personal jurisdiction.

Also, the SEC argues that the defendants purposefully directed their activities to investors in the United States by advertising PlexCoin through social media and websites, available throughout the United States, using various United States- based entities to obtain and process payments, and marketing and selling PlexCoin in U.S. Dollars. These were acts with foreseeable consequences in the United States.

The US regulator said that it had to take an emergency action to stop Lacroix, a recidivist securities law violator in Canada, and his partner Paradis-Royer from further misappropriation of investor funds illegally raised through the fraudulent and unregistered offer and sale of securities called “PlexCoin” or “PlexCoin Tokens” in a purported “Initial Coin Offering”.

The case is captioned Securities and Exchange Commission v. PlexCorps (1:17-cv-07007).

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