The Securities and Exchange Commission has halted another fraudulent initial coin offering, arguing that operators of ‘Blockvest ICO’ not only have violated securities regulations but also falsely claimed the company was approved by the top US regulator. The SEC secured a court order freezing the firm’s assets and haltings the operations of what it says is a fraudulent cryptocurrency scheme.
Explaining the background, the SEC says Blockvest LLC and its founder, Reginald Buddy Ringgold sought to raise funds from investors by misrepresenting the company’s partners and regulatory status. Specifically, Ringgold made various false claims about business relationships with several prominent companies and regulators, including the SEC, in order to entice investors and hype their ongoing pre-ICO sales.
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In addition, Ringgold, who also goes by the name Rasool Abdul Rahim El, misrepresented the types of products and services that his companies would provide, fabricated client testimonials and used a fake agency called the “Blockchain Exchange Commission,” to promote the ICO. This included using a graphic similar to the SEC’s seal and the same address as SEC headquarters.
According to the order, in the course of the offering, the company and other promoters emphasized that investors could expect that efforts of the company and others would lead to an increase in the value of the tokens.
Blockvest was touted as a new decentralized exchange for crypto assets as well as a cryptocurrency index fund that tracks the top 30 cryptocurrencies. The following youtube video features the ICO founder who further explains his murky offering.
The Blockvest case is the latest to be brought by the SEC’s cyber unit, which was created last year to target violations involving distributed ledger technology and initial coin offerings as part of a new effort to fight cyber-crime.
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The SEC claims that the offering ran afoul of securities laws because the tokens being offered could be considered securities, and thus the principles should have registered with the SEC as broker-dealers.
The regulatory status of ICOs, and cryptocurrency offerings generally, remains somewhat murky. However, the SEC warned that securities law may apply to some virtual tokens depending on their specific characteristics. In those cases, securities registration, disclosure and other requirements apply.
With new regulations, a more defined structure, and well-defined demands from clients, the cryptocurrency and ICO industry will be a primary area of focus at the 2018 London Summit.
Earlier this year, the SEC’s Office of Investor Education and Advocacy (OIEA) created a bogus initial coin offering (ICO) website that advertises a ‘too good to be’ true investment opportunity. The regulator said it wants to explain that as with many other hyped markets, scammers are never far behind in trying to take advantage of cryptocurrency-based schemes.
Commenting on the news, Robert A. Cohen, Chief of the SEC Enforcement Division’s Cyber Unit, said “We allege that this ICO is using both the SEC seal and a made-up crypto regulatory authority to trick investors into believing the ICO was approved by regulators. The SEC does not endorse investment products and investors should be highly skeptical of any claims suggesting otherwise.”