SEC Charges Man With $42 Million Crypto Fraud Scheme
A US entrepreneur has been charged with defrauding investors in a cryptocurrency Initial Coin Offering (ICO) that raised more than $42 million.
The Securities and Exchange Commission (SEC) alleged that UnitedData founder Eran Eyal conducted a “fraudulent unregistered securities offering” by selling tokens for his Shopin business from August 2017 to April 2018.
It’s claimed that Eyal pocketed at least $500,000 of investor funds for rent, shopping, entertainment and even a dating service.
“Shopin aimed to use the funds from the sales of the Shopin Tokens to create universal shopper profiles, maintained on the blockchain, that would track customer purchase histories across online retailers and recommend products based on this information,” the SEC said.
“As alleged in the SEC's complaint, Shopin never created a functional platform. The complaint further alleges that Eyal and Shopin repeatedly lied to investors in connection with its offering, including misrepresentations about purported partnerships with certain well-known retailers and about the involvement of a prominent entrepreneur in the digital-asset space.”
Filed in a federal district court in Manhattan, the SEC complaint charges Eyal and Shopin with violating anti-fraud and registration securities laws, and seeks permanent injunctions and civil penalties, as well as preventing Eyal and Shopin from taking part in future digital-asset securities offerings.
The complaint comes in the same week that three men were charged for their part in an alleged cryptocurrency Ponzi scheme which defrauded investors out of $722 million.
The BitClub Network was a cryptocurrency mining operation that ran from April 2014 to December 2018 but never turned a profit.
The three were also charged by the SEC for failing to register the shares they were selling with the regulator.
The problem of cryptocurrency fraud schemes has become so acute that Twitter banned all ads related to ICOs and token sales last year.
Source: Information Security Magazine