The Securities and Exchange Commission (SEC) announced news on Monday (Dec. 4) that it obtained an emergency asset freeze to stop an initial coin offering (ICO) fraud that has already raised $15 million from thousands of investors since August.
The move is the first enforcement action for the SEC’s new Cyber Unit. The fraud prevention program was created in September to look at misconduct involving distributed ledger technology, ICOs, the spread of false information through digital and social media and hacking.
In a press release, the SEC said the fast-moving cryptocurrency scam promised investors a 13-fold profit in under a month. The move was against Quebec securities law violator, Dominic Lacroix, and his company, PlexCorps, which the SEC contends marketed and sold securities via an ICO dubbed PlexCoin. The company claimed the investment would give them 1,354 percent profit in under 29 days. The SEC also charged Lacroix’s partner, Sabrina Paradis-Royer, in connection with the scheme.
“This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing,” said Robert Cohen, chief of the Cyber Unit, in the press release. “We acted quickly to protect retail investors from this initial coin offering’s false promises.” The SEC obtained an emergency court order to freeze the assets of PlexCorps, Lacroix and Paradis-Royer.
In the complaint, the SEC charged Lacroix, Paradis-Royer and PlexCorps with violating anti-fraud provisions, and Lacroix and PlexCorps with violating the registration provision of the U.S. federal securities laws. The SEC wants permanent injunctions and disgorgement, plus interest and penalties. For Lacroix, the SEC also seeks an officer-and-director bar and a bar from offering digital securities against Lacroix and Paradis-Royer, the SEC said in the release.
For months now the SEC and regulators around the world have been warning about the risks associated with ICOs. Because ICOs aren’t regulated, investors can easily lose all their money, which appears to be the case in this ICO-related enforcement action.