U.S. Securities and Exchange Commission building in Washington, D.C. (Photo: Diego M. Radzinschi/ALM)SEC Files Suit Over False Endorsement of ICO
The U.S. Securities and Exchange Commission on Wednesday unsealed a complaint against cryptocurrency company Blockvest alleging that the company and its founder falsely claimed its initial coin offering had SEC backing.
October 11, 2018 at 02:31 PM
3 minute read
The U.S. Securities and Exchange Commission on Wednesday unsealed a complaint against a cryptocurrency company and its founder alleging that they falsely claimed its initial coin offering had the backing of the SEC.
The complaint against Blockvest and its founder, Reginald Buddy Ringgold III, was filed on Oct. 3, and on Oct. 5 Judge Gonzalo P. Curiel of the U.S District Court for the Southern District of California signed a temporary restraining order halting pre-ICO sales by Blockvest and Ringgold. The order also freezes Ringgold's and Blockvest's assets. Curiel also ordered that the defendants provide the SEC with a full list of their assets exceeding $5,000.
Blockvest did not immediately respond to request for comment. Ringgold, aka Rasool Abdul Rahim El, according to court documents, also did not immediately respond to a request for comment. Attorneys for Ringgold and Blockvest are not listed.
In the unsealed complaint, the SEC claims that Blockvest and Ringgold claimed their ICO had been registered and approved by the SEC and allegedly used the SEC's logo to promote the offering. The SEC further claims that the defendants made up an entire agency to promote the offering. The agency the defendants allegedly used was called the Blockchain Exchange Commission, or the BEC. The SEC alleges that Ringgold created the BEC and that it is a private business founded in 2015 as Fartlife LLC [sic]. It changed its name to Smartlife LLC in 2017. The company became BEC this past May.
“In reality, defendants have neither the regulatory 'approvals,' nor the established business relationships they claim,” the SEC alleges in the complaint.
In a news release announcing the unsealing of the complaint Robert A. Cohen, chief of the SEC enforcement division, said the defendants made up the relationship with the SEC and even created a fictitious regulatory agency.
“The SEC does not endorse investment products and investors should be highly skeptical of any claims suggesting otherwise,” Cohen said in the release.
The SEC filed claims of fraud in connection with the purchase or sale of securities, fraud in the offer or sale of securities and unregistered offer and sale of securities. The SEC is seeking a court order demanding Ringgold “return ill-gotten gains” including interest and penalties and an order which bars Ringgold from participating in offering any kind of security.
A hearing has been set for Oct. 18 for arguments over whether or not the court should grant a preliminary injunction.
A report published in September by Lex Machina indicates that in 2018 lawsuits over cryptocurrencies have risen. The report indicates that 45 cases had been filed as of September. That number is up from 15 in 2017. The report indicates that the SEC is behind 30 percent of the suits.
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