SEC brings charges against CEO of Fantasy Market over ICO fraud

Maria Nikolova

Jonathan C. Lucas, the former founder and CEO of Fantasy Market, has been charged with orchestrating a fraudulent initial coin offering.

The efforts of the United States Securities and Exchange Commission (SEC) to put an end to cryptocurrency-related fraud continue. On Monday, September 23, 2019, the US regulator announced the bringing of charges against Jonathan C. Lucas, the former founder and chief executive officer of Fantasy Market, a purported online adult entertainment marketplace. Lucas is charged with orchestrating a fraudulent initial coin offering (ICO).

According to the SEC’s complaint, beginning in August 2017, Lucas raised approximately $63,000 in cryptocurrency from more than 100 investors through the fraudulent offer and sale of unregistered digital securities of Fantasy Market.

The complaint states that Lucas made numerous materially false statements in a whitepaper and online to induce investors to participate in the ICO. For example, Lucas claimed that a “working-beta” version of the company’s adult-entertainment platform existed when one did not, presented a fictitious management team, and misrepresented his own experience. After garnering media attention over investor complaints, the complaint states, Lucas returned the funds raised to investors.

The SEC’s complaint, filed in the New York Southern District Court, charges Lucas with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 and the registration provisions of Sections 5(a) and 5(c) of the Securities Act.

Lucas has consented, without admitting or denying the allegations in the complaint, to the entry of a final judgment that imposes permanent injunctions from violations of the charged provisions. The judgment also orders the defendant to pay a civil penalty of $15,000, and imposes a five-year officer and director bar and a five year conduct-based injunction prohibiting Lucas from participating in any unregistered offering of securities, digital or otherwise, except for securities transactions for his own personal account. The proposed settlement is subject to court approval.

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