SEC reaches settlement with PlexCoin over ICO fraud
The settlement includes the imposition of fines on the individuals behind PlexCorps and orders that they pay disgorgement of $4.56 million.
There has been some development in the action taken by the United States Securities and Exchange Commission (SEC) against fraudulent scheme PlexCorps, aka PlexCoin, and the individuals behind it. According to documents filed with the New York Eastern District Court on August 9, 2019, the SEC says that the parties in the case have reached a settlement.
The documents filed with the Court include the signed consents of the individual defendants in this case – Dominique Lacroix, Sabrina Paradis-Royer, and PlexCorps a/k/a and d/b/a PlexCoin and Sidepay.ca, and a proposed final judgment against the defendants.
The SEC requests that the Court enter the proposed final judgment.
Let’s recall that, in December 2017, the SEC launched an emergency action, and obtained temporary restraining orders, to stop the defendants’ dissemination of a series of material false and misleading statements, and misappropriation of investor assets, in connection with the illegal offering through an initial coin offering (ICO) for unregistered securities known as PlexCoins.
The SEC charged Lacroix and PlexCorps with raising approximately $15 million through the unregistered sale of PlexCoins. The SEC also charged Lacroix and PlexCorps with falsely telling investors, among other things, that they were keeping the identity of the individuals behind PlexCorps secret to avoid poaching, and that investors could expect “enormous” and “real” returns from investing in PlexCoin of upwards of 1,300%. The regulator also alleged that Paradis-Royer participated in the scheme to defraud PlexCoin investors while aiding and abetting Lacroix’s and PlexCorps’ violations.
The SEC later filed an amended complaint further alleging that Lacroix and PlexCorps had lied about the amounts raised during the PlexCoin ICO, which was approximately $8.3 million, and not the $13 million Defendants had alleged. The amended complaint further alleged that the defendants had misappropriated at least $600,000 of investor proceeds for lavish personal expenses.
The SEC alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933, and that Lacroix and PlexCorps violated Sections 5(a) and 5(c) of the Securities Act.
Without admitting or denying the allegations in the SEC’s pleadings, the defendants have agreed to settle the claims against them by consenting to a final judgment that would:
- permanently enjoin them from future violations of Section 10(b) of the Exchange Act and Rule 10b-5, and Section 17(a) of the Securities Act, and permanently enjoin Lacroix and PlexCorps from future violations of Sections 5(a) and 5(c) of the Securities Act;
- order that Defendants pay disgorgement and prejudgment interest in the amount of $4,563,468.62 and $348,145.25;
- order that the Individual Defendants pay civil penalties of $1 million, each;
- order that Lacroix be permanently barred from acting as an officer or director of a public company;
- order that the Individual Defendants be barred from participating in any offering of digital securities;
- pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, create a Fair Fund so that collected civil penalties can be combined with collected disgorgement and prejudgment interest for distribution to victims (the “PlexCorps Fair Fund”);
- orders that asset custodians transfer the U.S. Frozen Assets to the Commission for distribution to investors; and
- orders that Defendants not oppose any action by the SEC to enforce or collect upon the final judgment against any assets belonging to Defendants, including assets frozen by orders of Canadian tribunals with respect to this matter.
The centerpiece of the proposed final judgments are three orders that, together, would begin the process of permitting the distribution of certain funds obtained from PlexCoin ICO victims. These orders are the order establishing the PlexCorps Fair Fund, the order directing the turnover of the U.S. Frozen Assets to the SEC, and the order that the defendants cooperate in collection actions against certain frozen assets, including in Canada.
The SEC notes that the proposed settlement is fair and reasonable and will serve the public interest.