The US Securities and Exchange Commission (SEC) has settled fraud and securities violation charges against SoluTech, a now-defunct blockchain project.
Announced last Friday, the project’s co-founder and chief executive officer, Nathan Pitruzzello, was slapped with a cease-and-desist order for selling unregistered securities and was fined $25,000.
Furthermore, he can never host digital asset security offerings again.
With a promise of building Scroll Network, a data management network on a blockchain, and a few other products, SoluTech raised $2.4 million in an initial coin offering (ICO) from over 100 investors, including investors from the United States.
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The US securities market regulator alleged that the company’s tokens fall under the category of securities based on the Howey test, but it did not obtain any approvals for selling them. Thus, SoluTech was blamed for selling unregistered securities from April 2018 through March 2019.
A Fraud at Its Core
Furthermore, Pitruzzello was accused of ‘recklessly’ misrepresenting the revenue of the company and also the capabilities and development process of the products.
“…during an effort in 2019 to sell Series A stock, SoluTech and Pitruzzello recklessly misrepresented to potential investors that other investors had provided term sheets to the company demonstrating their interest in investing in exchange for shares of the company’s preferred and capital stock, and circulated those false term sheets to third parties, including potential investors,” the SEC notification stated.
With all this, both SoluTech and its co-founder violated the anti-fraud provisions of the federal securities law.
In the settlement, the blockchain company was additionally ordered to destroy all its tokens within the next 30 days and will block its trading on the secondary market in 10 days.