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SEC files its first action against dubious ‘initial coin offering’
The U.S. Securities and Exchange Commission has finally acted against dubious initial coin offerings by taking legal action against a company that raised $15 million from investors in August.
In a statement, the SEC said that it had obtained an emergency asset freeze to halt trading by PlexCoin, an Ethereum blockchain-based token raise from a company going by the name of PlexCorps. It claims on its website that it aims to “broaden the possibilities of uses and to increase the number of users by simplifying the process of managing cryptocurrency to the maximum,” whatever that is meant to mean.
The SEC action has international implications. PlexCoin and its founder, Dominic Lacroix, described by the SEC as a “recidivist” securities law violator, is based in Quebec, Canada. “Lacroix and PlexCorps marketed and sold securities called PlexCoin on the internet to investors in the U.S. and elsewhere, claiming that investments in PlexCoin would yield a 1,354 percent profit in less than 29 days,” the SEC said.
Lacroix, business partner Sabrina Paradis-Royer and PlexCorps are alleged to have violated the registration provision of the U.S. federal securities laws. The SEC seeks permanent injunctions, disgorgement plus interest and penalties against the accused.
The case is notable because it’s the first time the SEC has taken action against an ICO since it announced in July that they are subject to securities laws. It’s also the first time the SEC’s Cyber Unit, created in September to investigate “misconduct involving distributed ledger technology and initial coin offerings,” has been involved in a case against a dubious company.
“This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing,” Cyber Unit Chief Robert Cohen said. “We acted quickly to protect retail investors from this initial coin offering’s false promises.”
The action is a positive step forward against fraud in a market that has, mostly, until now involved companies with little to no regulatory oversight. Recent ICOs that have either involved outright fraud or have fallen in to disrepute after their launch include Confido and Tezos.
Image: PlexCoin/screenshot
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