SEC Charges Arbitrade, Cryptobontix in Connection With Crypto Pump-and-Dump Scheme

The Securities and Exchange Commission (SEC) has filed charges against Bermudan company Arbitrade, Canadian company Cryptobontix and their principals.

Between May 2018 and January 2019 they allegedly undertook a pump-and-dump scheme involving a cryptocurrency called “Dignity” or “DIG,” the SEC said Friday (Sept. 30) in a press release.

The SEC alleged that the two companies falsely claimed that Arbitrade had acquired gold bullion, that the DIG tokens would be backed with this gold, and that an independent accounting firm had verified that the gold existed, according to the release.

They then sold $36.8 million of DIG “at prices fraudulently inflated by the public misstatements about the supposed gold acquisition,” the release stated.

The companies have been charged with violating the federal securities laws’ antifraud and securities registration provisions, according to the release.

As PYMNTS reported in August, pump-and-dump is a standard equities market scam that has adapted well to cryptocurrency.

Read more: PYMNTS Cryptocurrency Glossary: Regulations, Legal and Crime

In pump-and-dump, a scammer starts and nourishes a rumor that a worthless token is going to skyrocket in value, thereby pumping up the price before quickly selling their own holding.

As crypto has become more mainstream, lawsuits over crypto losses have become more common, and many of these lawsuits are fueled through investors alleging the coins were hyped and sold under false pretenses.

Some of the proposed class-action suits allege that there have been pump-and-dump schemes involving celebrity promoters.

See more: As Crypto Values Drop, Lawsuits Go Up

The SEC first jumped on the issue of celebrity crypto endorsers in November 2017, issuing a statement urging caution around celebrity-backed initial coin offerings (ICOs) and encouraging “investors to research potential investments rather than rely on paid endorsements from artists, sports figures or other icons.”

Read also: Kardashian, Mayweather Face Class Action Over Alleged Crypto Endorsements

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