SEC Files Emergency Action to Halt Alleged ICO Scam

On Friday, December 1, 2017, the SEC filed an emergency action in federal district court in Brooklyn alleging that Dominic Lacroix and Sabrina Paradis-Roger, both from Quebec, Canada, raised approximately $15 million in a purported fraudulent unregistered Initial Coin Offering (ICO) involving PlexCoin.  In its complaint, the SEC alleged that a recidivist Quebec securities law violator, Dominic Lacroix, and his company, PlexCorps, had raised millions from investors since August 2017 by promising a 13-fold profit in less than a month.  In addition to filing the action, the SEC sought and obtained an asset freeze. Read the SEC press release here.

This action comes on the heels of a similar type of action filed by the SEC involving ICOs purportedly backed by investments in real estate and diamonds.  In that case, the SEC alleged that Maksim Zaslavskly touted REcoin as the first ever cryptocurrency backed by real estate.  Zaslavskly allegedly told investors that he had a team of lawyers, professionals, brokers and accountants that would invest REcoin’s ICO proceeds into real estate.  In reality, according to the SEC, no such operations existed and Zaslavskly never hired or even consulted any professionals.  Similar to PlexCoin case, the SEC sought and obtained an emergency court order freezing the assets of Zaslavskly and his companies. Read the SEC press release here.

Both of these actions reflect aggressive filings by the SEC for those involved in unregistered fraudulent ICOs.  Stay tuned as the Enforcement Division may be gearing up for further action.     

CBOE and CME Self-Certify Bitcoin Futures, Cantor Self-Certifies Bitcoin Binary Options and NFA Issues Investor Alert

It was a busy morning at the intersection of derivatives and virtual currencies. The world of virtual currencies is about to simultaneously become a lot more institutional and a lot more retail. Read an overview of what happened and some thoughts about what it means for the world of virtual currencies on our Derivatives & Repo Report.

Prepare for the Future With Cryptocurrency Insurance

Some estimates calculate that over 23 billion “things” were connected through the internet in 2016. This number is projected to rise to over 50 billion by 2020. The broad category is known as the Internet of Things (IoT), and the new technology connects everything, from household devices to cars to industrial machinery, to the internet via enhanced sensors. The exponential growth in connectivity and new product development carry additional risks for companies investing in IoT technology. We offer some ways to protect your interests.

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Blockchain Week in Review – October 13, 2017

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.

U.S. Developments

Litigation Updates

CFTC Files Civil Action Over Alleged Fraudulent Scheme
On September 21st, the Commodity Futures Trading Commission (“CFTC”) announced the filing of claims against Nicholas Gelfman and Gelfman Blueprint, Inc. (the “Defendants”) for fraud, misappropriation, and issuing false account statements in connection with solicited investments in Bitcoin.  According to the allegations asserted by the CFTC, the Defendants operated a Ponzi scheme, misappropriated funds from investors, and took steps to conceal losses (including by staging a “hack” on its computer systems designed to conceal what were actually trading losses and depletion of funds due to misappropriation).

Notably, this enforcement action (1) articulates the CFTC’s position that Bitcoin and other virtual currencies are encompassed in the definition of a “commodity,” under Continue Reading

FinTech Highlights from CFTC Chairman Giancarlo’s Testimony Before House Agricultural Committee

Earlier this morning, CFTC Chairman Christopher Giancarlo testified before the House Agricultural Committee. The following are highlights of “Fin Tech” issues addressed during the course of that testimony. Continue reading “FinTech Highlights from CFTC Chairman Giancarlo’s Testimony Before House Agricultural Committee” from the FinTech Report here.

CFTC Files Charges in Bitcoin Ponzi Scheme

On September 21st, the Commodity Futures Trading Commission (CFTC) announced the filing of charges against Nicholas Gelfman and Gelfman Blueprint, Inc. (the “Defendants”) for fraud, misappropriation, and issuing false account statements in connection with solicited investments in Bitcoin.  According to the allegations asserted by the CFTC, the Defendants operated a Ponzi scheme, misappropriated funds from investors, and took steps to conceal losses (including by staging a “hack” on its computer systems designed to conceal what were actually trading losses and depletion of funds due to misappropriation). Continue reading “CFTC Files Charges in Bitcoin Ponzi Scheme” from Derivatives & Repo Report Blog here.

Beijing-Based Cryptocurrency Trading Exchanges Told to Announce Trading Halt

Under the impact of the Chinese government’s recent formal notices of halting ICOs, Notice 99 and Joint Notice released on September 2, 2017 and September 4, 2017 respectively [1], Beijing authorities have taken further actions and held meetings with Beijing-based trading platforms with regard to a trading halt on September 15, 2017, following Shanghai’s “verbal notice” of a trading halt and the Shanghai-based exchange BTCChina’s sudden announcement of a halt to its trading on September 14, 2017. Continue Reading

China Halts ICOs and Token Sales and China-Based Trading Platforms Suspend Trading Amid Reports of Additional Government Restrictions

The government of the People’s Republic of China (PRC) has formally announced a suspension to all ICOs and token offerings and financing activities by releasing two notices, namely, the Notice of Seven Ministries Including the People’s Bank of China on Guard against Risks of Token Offering and Financing (Joint Notice) and Notice on the Rectification of Token Offering and Financing Activities (Zheng Zhi Ban Han [2017] No.99)( Notice 99). Further, there is speculation that formal government action suspending virtual currency trading platforms is imminent, which has already caused major China-based trading platforms to suspend their activities.

In the two formal notices, the Chinese government has identified initial coin offerings (ICOs) as essentially an unapproved illegal public financing highly suspected of facilitating illegal fund-raising, illegal securities offerings, illegal offering and sale of tokens, financial fraud, and pyramid schemes. Accordingly, these documents provide that all types of token offering and financing shall come to a halt. The organizations and individuals who have completed the token offering and financing should plan to withdraw and make other arrangements, protecting the interests of investors and handling the risks properly.

Continue Reading

Blockchain Week in Review – September 15, 2017

Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.

U.S. Developments
Regulatory Updates

Congressional Bill Introduced to Modify Taxation of Small Cryptocurrency Purchases
Last week, Rep. Jared Polis (D – Colo.) and Rep. David Schweikert (R – Ariz.) introduced the Cryptocurrency Tax Fairness Act of 2017 (the “Bill”). The bipartisan legislation creates a structure for taxing purchases made with cryptocurrency. The Bill’s primary goal is to ease the burden on those who make purchases with cryptocurrency by establishing a threshold under which they would not be required to report profits and losses – thus making it easier to keep track of tax obligations. In doing so the Bill would bring cryptocurrency under a Continue Reading

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