As the search for fraudulent initial coin offering (ICO) continues, the Securities and Exchange Commission (SEC) has charged another blockchain 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.
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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.