SEC Cyber Unit Files First Action to Halt ICO Fraud PlexCoin

The SEC today announced an enforcement action against the Initial Coin Offering (ICO) by PlexCoin. The SEC obtained a freeze on the purportedly $15 million in investor funds raised by PlexCoin from thousands of U.S. and international investors since August.

According to the complaint filed by the SEC in the emergency action, PlexCoin and its owners promised early investors returns of 1,354% in under 29 days. They also indicated the potential returns could be as high as 88,000% based on other ICOs or cryptocurrency investments. They made other misrepresentations too, including that they had a team of people operating in Singapore.

Quebec’s Financial Markets Authority obtained an injunction against the sale of PlexCoin Tokens but the Defendants continued to sell them. The U.S. alleged that the Defendants misappropriated at least $200,000 from investor funds for extravagant personal expenditures as well as would soon gain access to three accounts with more than $810,000 from their fraud.

The SEC press release praised the quick action of the Cyber Unit to protect retail investors and the Chief of the Cyber Unit said this “is exactly the kind of misconduct the unit will be pursuing.”

The SEC’s pursuit of fraud in the ICO market should come as no surprise since many have already warned about it.  Previously, Wikipedia founder Jimmy Wales told CNBC in October that many initial coin offerings were scams as he cautioned investors from participating. Brad Garlinghouse, CEO of Ripple (a large cryptocurrency), told CNBC that “a lot of what’s happening in the ICO market is actually fraud ….” Joseph Lubin, co-founder of ethereum, told CNBC that there has been “a lot of copycat projects” where the company was copying previously used materials and didn’t intend to deliver value to buyers.

In other bitcoin news, Thomas Peterffy, CEO of Interactive Brokers, expressed concerns to the CFTC that the launch of bitcoin futures could create a Lehman Brothers-style collapse of a clearing house if traders purchased too many futures and couldn’t cover the shortfall during a price decline.

The bitcoin futures contracts at the CME will start trading on December 18, 2017 and there will be a margin requirement of 35% for transactions, which is high for a currency.  CBOE trading will start on December 11th.  The Nasdaq has not yet confirmed media reports that they will soon allow trading in the digital currency.

If you have evidence of an ICO fraud, contact our SEC whistleblower attorneys by calling 1-800-590-4116. We offer a free, confidential consultation to evaluate your evidence and discuss the process of reporting to the U.S. Government.