SEC renews motion for Court approval of settlement with PlexCoin over ICO fraud

Maria Nikolova

The US regulator plans to work with Canadian authorities to determine if the assets frozen in Canada and the US will be combined so that a single, cost-effective distribution may be made to harmed investors.

Less than a month after the United States Securities and Exchange Commission (SEC) filed a proposed consent judgment in its action against fraudulent scheme PlexCorps, aka PlexCoin, and the individuals behind it, the US regulator has renewed its motion for Court approval of the proposed judgment.

The relevant document was filed with the New York Eastern District Court on Friday, September 6, 2019.

The document, seen by FinanceFeeds, addresses whether the SEC’s discretion related to sending funds collected in connection with a Commission enforcement action to the United States Treasury has been challenged, and renews the Motion to approve the Proposed Consent Judgment in this matter. After consultation and research, the SEC says it is not aware of any matter challenging the Commission’s discretion to determine that funds collected as disgorgement and civil penalties in an action should go to the general account of the United States Treasury.

In this matter, the SEC intends to work with Canadian authorities to determine if the assets frozen in Canada and the United States will be combined so that a single, cost-effective distribution may be made to harmed investors.

In this case, the Commission’s exercise of discretion to determine that any collected funds be paid to the Treasury remains subject to approval by the Court. Accordingly, the Commission requests that the Court “so order” the Proposed Consent Judgment.

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 Defendants cooperate in collection actions against certain frozen assets, including in Canada.

The SEC explains that in a case brought by the Quebec’s Financial Markets Authority against Dominic Lacroix and a number of other entities involved in the PlexCoin fraud No.: 200-11-025040-182, filed in the Superior Court in Quebec, Canada, a Quebec tribunal appointed a receiver, and ordered the defendants to turn over approximately $4 million worth of Bitcoins obtained from PlexCoin ICO victims. With the cooperation of the Quebec Autorite des Marches Financiers (“QAMF”), the SEC identified certain other PlexCoin ICO victim assets, including the U.S. Frozen Assets. By relinquishing their rights to these combined assets, the defendants are clearing the way to seek orders from the Quebec tribunals permitting the distribution of assets.

The expectation is that the assets frozen in Canada and the US frozen assets will be combined, so that a single, cost-effective distribution may be made to harmed investors under a plan to be proposed by the Receiver or another potential distribution agent. Because the goal of these orders is to return to victims as much of the remaining proceeds as possible, they are in the public interest and fair and reasonable, the SEC says.

Let’s recall that, in December 2017, the SEC launched an emergency action, and obtained temporary restraining orders, to prevent the defendants – Dominique Lacroix, Sabrina Paradis-Royer, and PlexCorps a/k/a and d/b/a PlexCoin and Sidepay.ca, from disseminating 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”);
  • order that asset custodians transfer the U.S. Frozen Assets to the Commission for distribution to investors; and
  • order 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.

Read this next

Digital Assets

BlackRock digs further into crypto with metaverse ETF

BlackRock, the world’s largest asset manager with almost $10 trillion in AUM, is set to launch a new metaverse ETF to help investors securely monetize on the booming immersive version of the internet.

Digital Assets

Binance wins license in New Zealand as rival Huobi shutters derivatives

Binance, the world’s largest crypto exchange by traded volume, has obtained licenses to operate in New Zealand, even after rival Huobi shutdown derivatives trading last month due to concerns about regulations.

Retail FX

Hong Kong busts perpetrators of ‘ramp and dump’ scam

Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), has charged thirteen suspects of market manipulation in a joint operation with the local police.

Institutional FX

TradingView integrates market data from German Tradegate exchange

TradingView announced that it ‎has increased data coverage to allow its users to receive information from ‎and get free access to the intra-day and tick data from Tradegate Exchange.

Retail FX

Spotware Systems introduces Custom Push Notifications for cTrader mobile apps

Spotware Systems, a technology provider for the electronic trading industry, is introducing a new push notification feature to alert mobile users of price swings and market fluctuations through their cTrader app.

Market News

The Week Ahead: 30 September from David Madden, Market Analyst at Equiti Group

Sterling dominated the headlines last week, as there were concerns the UK government might struggle to service its debt.

Inside View

How does the quality of signal providers affect your business?

A must-have onboarding process for brokers with investment services like PAMM, MAM, or copy trading

Technology

DBS deploys Nasdaq Trade Surveillance

“The confidence that markets and our clients have in DBS as a safe and trusted banking group is anchored on our ability to detect and respond to anomalous activity, which in turn calls for a robust surveillance and prevention infrastructure.”

Industry News

SEC charges Justin Costello and David Ferraro for securities fraud and posing as billionaire veteran

The Securities and Exchange Commission charged Cannabis executive Justin Costello and David Ferraro, an associate of Costello’s, for promoting the stock of several microcap companies on social media without disclosing their own simultaneous stock sales as market prices rose.

<