SEC Freezes Assets of Bogus ICO Run by Former State Senator

No stranger to controversy, Schmidt was accused in 2011 with spending his campaign funds on personal use.

US courts have granted the Securities and Exchange Commission (SEC) an emergency freeze on assets of an initial coin offering (ICO) that bilked as much as $4.3 million out of investors excited by the possibilities of the fraud perpetrated by a former Washington state senator.

The SEC charged Robert Dunlap and Nicole Bowdler, who worked with former State Senator Dave Schmidt, with arranging an ICO scheme called “Meta 1 Coin” that touted lucrative investment returns. The SEC also charged the defendants with providing pool participants with false statements that misrepresented the ICO’s profitability claiming that it would yield a 224,923 percent profit in less than a year.

The Most Diverse Audience to Date at FMLS 2020 – Where Finance Meets Innovation

Schmidt served as a state senator in Washington from 2003 until his unsuccessful re-election campaign in 2006. No stranger to controversy, he was accused in 2011 with spending his campaign funds on personal use, including mortgage payments and associated fees for the condominium where he lived and ran the re-election operation. He also paid for travel to conferences not directly related to his campaign. Schmidt denied misusing any campaign dollars but was ultimately fined $10,000.

On top of SEC charges, prosecutors accused the ICO organizers of deploying elaborate tactics and numerous false statements, including that the Meta 1 Coin was backed by a $1 billion art collection, and it has appointed specialists who realize how to spot genuine artistic creations. The scam operatives further claimed that their token is backed by $2 billion of gold and that an accounting firm was auditing the gold assets.

Instead, they spent the pool’s monies to pay for their personal expenses, including a $215,000 Ferrari, cash withdrawals, hotel, casino and restaurant expenses, and payments for other personal items.

Suggested articles

Introducing NextV - The Full Scope Solution To Building Your Next Virtual EventGo to article >>

Steven Seagal was fined in a similar case

While the defendants rewarded investors for recruiting new participants, the SEC describes these entities as fledgling companies with little to no actual business operations and few prospects for profitable operations.

As explained in the order, the SEC also determined that Meta 1 Coin amounted to selling securities without filing a registration or qualifying for a registration exemption.

If convicted with wire fraud, each defendant could face up to 20 years in prison and a fine of $1 million while selling unregistered securities carries a maximum of five years in prison and a $250,000 fiscal penalty.

The Meta 1 Coin case comes nearly two months after action film star Steven Seagal was fined for unlawfully touting cryptocurrencies and acting as the brand ambassador for a controversial initial coin offering (ICO), called Bitcoiin2Gen (B2G).

Got a news tip? Let Us Know