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U.S. Government Agencies Taking Action On ICO Fraud

September 13, 2018


For as much as U.S. governing bodies have critisied cryptocurrencies, and especially ICOs for risks, fraud and deception, there has not been widespread action taken. There have been several major lawsuits filed, but recently the SEC has made two new charges and FINRA has stepped into make their first case for fraud against a cryptocurrency related company


SEC Charges Two Companies


Crypto Asset Management LP  has been accused of marketing under false pretenses, and TokenLot LLC have been accused of acting as unregistered broker-dealers. In both cases, the SEC has already reached agreement with the owners of the companies.


Crypto Asset Management - Its principal owner, Timothy Enneking raised more than $3 million in late 2017 claiming that the company was "the first regulated crypto asset fund in the United States." He has agreed to pay a penalty of $200,000 and confirm the SEC's cease-and-desist order, but he has not admitted or denied the accusations.


TokenLot - Owners Lenny Kugel and Eli L. Lewitt, described their project as an "ICO Superstore.” They claimed to have "received orders from more than 6,100 retail investors and handled more than 200 different digital tokens.” Many of the digital tokens they cited would be  considered securities. The owners have also neither confirmed or denied the accusations, but have agreed to pay $471,000 in disgorgement plus $7,929 in interest. In addition, the two will each pay $45,000 individually in penalties and have been ordered an “investment company prohibition with the right to reapply after three years." An independent third party will be contracted to “destroy TokenLot's remaining inventory of digital assets."


Judge Confirms Decision On “ReCoin” and “DRC World”


A judge in New York state ruled that the decision on a case against a pair of fraudulent ICOs from last year will be upheld, in accordance with the regulatory structure set in place by the SEC. The defendant had asked the case to be dismissed. It involved serious consumer deception tactics involving two separate businesses owned by the defendant.


The first, “DRC World” claimed to have raised "between $2 million and $4 million,” but the total was only $300,000. The company advertised purchasing their token would create an investment in discounted diamonds, but they never did this and had no relation to the diamond industry. The second “ReCoin” was supposed to account for investment in physical real estate, but this similarly never happened.


FINRA Charges HempCoin Founder


A Massachusetts resident is being charged by FINRA with securities fraud for an unregistered token sale. HempCoin token claimed to be "the first minable coin backed by marketable securities… the world's first currency to represent equity ownership." But the company and its owner never actually applied for an exemption. No action has been taken by the defendant in this case yet, and the expected punishment if found guilty has not been stated by FINRA.



By: BGN Editorial Staff



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