The U.S. Securities and Exchange Commission building in Washington. (Photo: Diego M. Radzinschi/ALM)

The U.S. Securities and Exchange Commission on Tuesday obtained an order barring the founder of the company behind the Tomahawkcoin initial coin offering from being an officer or director in any registered company or participating in any penny stock offerings.

According to the SEC, David T. Laurance attempted to raise money through the sale of the blockchain-based digital token nicknamed TOM to fund Tomahawk Exploration LLC, an oil-and-gas company focused on exploration and drilling in Kern County, California. The SEC claimed that Tomahawk's promotional material used inflated oil production estimates that were contradicted by internal projections, and the company misleadingly suggested that it had leases for drilling sites.

The SEC also claimed that the promotional materially falsely said that Laurance had a “flawless background,” as he had a prior securities-related criminal conviction and personal bankruptcies.

The ICO, which sought to raise $5 million, failed to raise any money. But 80,000 TOM tokens were issued as part of a “bounty program” for people who provided online promotional services such as requesting cryptocurrency exchanges to list Tomahawkcoin or promoting the ICO via social media. Notably to the SEC, the TOM promotional material represented that would have the option to transfer their tokens for Tomahawk Exploration shares at some future date. According to the SEC's order, the TOM tokens where an unregistered security since they presented “a transferable share or option on a security.”

“Tomahawk's issuance of tokens under the bounty program constituted an offer and sale of securities because the company provided TOM to investors in exchange for services designed to advance Tomahawk's economic interests and foster a trading market for its securities,” the order said.

In a statement announcing the consent order, Robert Cohen, chief of the SEC's cyber unit, said that investors should look out for “old-school frauds, like oil and gas schemes, masquerading as innovative blockchain-based ICOs.”

Reached by phone Tuesday, Laurance, a 76-year-old who goes by the name Tom, said that he hadn't seen the order yet, but that the person he had been working with on the ICO had assured him that it would only be promoted to qualified investors. “This was not supposed to be for John Q. Public,” Laurance said. “I did not realize he had opened it up to the public.”

Laurance said he thought he got “swept up in this thing” due to his prior record.

“Look before you leap, I guess,” said Laurance, who also consented to a $30,000 civil penalty as part of Tuesday's order.

The SEC's investigation was handled by attorneys Victor Hong, Justin Lichterman and Serafima Krikunova in the San Francisco Regional Office, with assistance from Joseph Dugan of the Fort Worth Regional Office. The case was supervised by Cohen and Steven Buchholz of the SEC's Cyber Unit.

Laurance was unrepresented in the matter. “I didn't think I needed counsel, but I was mistaken,” he said.

Read the consent order here: