The US Securities and Exchange Commission says its newly created cyber unit had filed its first charges against an ‘initial coin offering’, alleging that a privately held company called PlexCorps and its top two officials had defrauded investors.
The SEC said in a statement that it had obtained an emergency order to halt the PlexCorps initial coin offering, which had raised up to $15m (€12.6m) from thousands of investors since August by falsely promising a 13-fold profit in less than a month.
The explosive growth of initial coin offerings, a capital-raising tool that uses bitcoin and other cryptocurrencies to fund projects that leverage technologies such as blockchain, has sparked concern among regulators who say such schemes lack transparency.
The cryptocurrency market is watching closely to see how regulators respond to initial coin offerings, which SEC chairman Jay Clayton has said closely resemble new company initial public offerings implying they should be regulated just as tightly.
The SEC’s complaint, filed in a federal court in New York, alleges that Dominic Lacroix of PlexCorps marketed and sold securities called PlexCoin on the internet to investors in the US and overseas, claiming the investments would yield a 1,354% profit in fewer than 29 days.
The SEC also charged Lacroix’s partner, Sabrina Paradis-Royer, in connection with the scheme.
The charges are the first filed by the SEC’s new cyber unit, created in September to focus on misconduct involving distributed ledger technology, initial coin offerings, the spread of false information through electronic and social media and hacking.
The SEC’s complaint charges Lacroix, Paradis-Royer, and PlexCorps with violating anti-fraud provisions of the federal securities law, and Lacroix and PlexCorps with violating registration provisions, the SEC said.
The complaint seeks permanent injunctions, 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.
Meanwhile, the UK wants to increase regulation of bitcoin and other digital currencies by expanding the reach of EU anti-money-laundering rules that force traders to disclose their identities and report suspicious activity.