SEC Sues $42 Million ICO for Selling Unregistered Securities

As the search for fraudulent initial coin offering (ICO) continues, the Securities and Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term Commission (SEC) has charged another Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term project for defrauding hundreds of investors, raising $42 million.

According to the announcement, Eran Eyal, founder of UnitedData, conducted a fraudulent ICO of unregistered securities, selling Shopin tokens. Shopin planned to use the funds from the sales of the Shopin Tokens to create universal shopper profiles, maintained on the blockchain, that would track customer purchase histories across online retailers and recommend products based on this information.

The token sale was conducted between August 2017 to April 2018 and ended up raising $42 million.

A fake project hoarding millions

The market watchdog, however, alleged that Shopin never created a functional platform. The complaint further alleges that Eyal and Shopin repeatedly lied to investors in connection with its offering, including misrepresentations about purported partnerships with certain well-known retailers and about the involvement of a prominent entrepreneur in the digital asset space.

The founder was also accused of using customer funds for his personal use, including at least $500,000 used for rent, shopping, entertainment expenses, and dating service.

Commenting on the case, Marc P. Berger, director of the SEC's New York regional office, said: “As alleged in today’s action, the SEC seeks to hold Eyal and Shopin responsible for scamming innocent investors with false claims about relationships and contracts they had secured in support of a blockchain-based universal shopper profile.”

“Retail investors considering an investment in a digital asset that meets the definition of a security must be afforded the same truthful disclosures as in any traditional securities offering.”

According to the agency, the company and its founder violated antifraud and registration provisions of the federal securities laws. It is now seeking permanent injunctions, disgorgement with interest, and civil penalties, as well as an officer-and-director bar against Eyal and a bar against Eyal and Shopin prohibiting them from participating in any future offering of digital-asset securities.

Last month, Gladius, another multi-million ICO, dissolved the company, ignoring the SEC’s order to refund the investors.