A leading American regulator has stepped up its fight against a firm which it alleges operated a fraudulent ICO, or initial coin offering.
The Securities and Exchange Commission (SEC) is pursuing PlexCorps, which last summer managed to raise $15 million through an ICO.
However, a probe by the SEC later uncovered irregularities, which were compounded when the firm failed shortly after it raised the crypto funds.
Now, the SEC says they have more evidence of alleged crypto fraud.
The probe found that PlexCorps included claims about returns on investments. When a firm does this, it gets pushed into the category of a security – meaning that additional regulations apply.
It also revealed that the firm’s founder, a man named Dominic Lacroix, concealed the nature of his involvement in the firm as he had previously been convicted on the grounds of securities fraud.
In a further twist, it was revealed that claims that the firm was based in Singapore and had more than 40 workers were bogus. It transpires that the firm had just a handful of team members, and that it was based in the Canadian city of Quebec.
As well as question marks over the firm’s staff and its regulatory compliance, issues were also raised during the investigation regarding where some of the funds went to.
While those behind the firm claimed that investments made would be directed towards PlexCorps’ product development budget, it transpired that Lacroix and another team member – Sabrina Paradis-Royer – allegedly ended up taking a large amount of cash for themselves.
As well as forming part of transfers into their own, non-business bank accounts, cash was allegedly also spent on their transport costs, DIY at home, and more.
The SEC also claims that the pair behind PlexCorps also authorised Facebook adverts promoting their alleged scam.
Back when the allegations against PlexCorps first surfaced, the SEC said that the charges were the inaugural ones for the Cyber Unit, which had been launched just a few months earlier.
In a statement in December 2017, the SEC said: “The Securities and Exchange Commission today announced it obtained an emergency asset freeze to halt a fast-moving Initial Coin Offering (ICO) fraud that raised up to $15 million from thousands of investors since August by falsely promising a 13-fold profit in less than a month.”
“Today’s charges are the first filed by the SEC’s new Cyber Unit. The unit was created in September to focus the Enforcement Division’s cyber-related expertise on misconduct involving distributed ledger technology and initial coin offerings, the spread of false information through electronic and social media, hacking and threats to trading platforms”, it added.
Robert Cohen, Chief of the firm’s Cyber Unit, pointed out that the SEC had moved fast in order to curtail the worst elements of the scam.
“This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing”, he said.
“We acted quickly to protect retail investors from this initial coin offering’s false promises.”
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