Different governments seem poised to pass the message across to organizers of ICO that it would not be business as usual. This is coming in the heels with scam and near scam startups having caused losses of millions of dollars in investor funds this year.
The SEC filed charges bordering on financial scam against Dominic Lacroix and Sabrina Paradis-Royer, organizers of PlexCoin ICO that raked in $15 million. Lacroix and Paradks-Royer, both of whom were said to be in a romantic relationship were charged along with PlexCorp, the Lacroix company behind the ICO for breach of anti-fraud regulations.
Making reference to publicity materials used for the August ICO, the SEC pointed out an unrealistic 1354 percent in 29 days promise made to Plexicoin investors. They sought injunction to permanently block Lacroix whom they described as serial securities law violator from having any more roles in a public company.
The charge file read that the Quebec residents failed to comply with regulations to register securities with SEC and asked the Brooklyn Federal Court for an expeditionary freeze of PlexiCorp assets. The suit also prayed the court to stop the PlexiCoin ICO team from getting involved in future ICO which the commission termed ‘digital securities’.
PlexCorp, which raised $15 million on their Plexicoin startup is the first company to be charged by the SEC Cyber Task force Unit established in September in the wake of internet related threats such as fraudulent ICO. The Unit Head of the taskforce Robert Cohen said it was necessary that they acted fast to protect investors from misrepresented ICOs.
The Lacroix-PlexCoin case brings to fore the need for wider cooperation among agencies charged with ICO regulations as it was reported that Mr Lacroix ran foul of Quebec Laws having been sanctioned and fined by a Quebec court in October for conducting an ICO in contempt of a court ruling for him not to.
Mr. Lacroix seems to have a huge appetite for investor funds having been fined $25000 in 2013 along with others for illegal practice by AMF, Quebec financial regulatory agency.
Meanwhile, the Chinese news agency Xinhua has reported security crackdown that has arrested 107 persons behind virtual coins in the country. China, which placed a ban on ICO last September seems to have a large populace who feel left out of the virtual currency boom. Individuals and groups who claimed that their currencies had the backing of the central government have created a black market for the product, raking in millions of dollars.
These coins touted as Fintech altcoins proved to be nothing other than ponzi schemes in which investors are required to recruit others before they receive payments. Operators or teams behind these coins would organize seminars in fancy hotels where investors are convinced by being shown proofs of payments they have received.
The Chinese Public Security Department announced that they have conducted nearly 6000 criminal investigations on financial crimes involving scam virtual currencies such as One Coin, Five Element Coin, Ticcoins and others that have conned investors using terms such as blockchain in their marketing and presentations.
The ICO boom of 2017 has created avenues for dubious groups to leverage on the ease with which virtual currencies can be created to defraud investors. Yang, a Chinese woman invested all her family’s savings in a ‘virtual currency’ without her husband’s knowledge and lost the money. Her marriage ended in a divorce when her husband realized what she had done.
Investigators in Hainan Province arrested Mr. Liu who claimed to be a cryptocurrency expert and the operator of the Asia-Euro Coin, another fake virtual currency that scammed investors of millions of dollars. His company was said to have had $613 million in trade volumes.
All these scam busting operations and cases point to the urgency with which the digital currency industry needs streamlining and regulation. With social media as societal culture. Scam ICOs and the like can easily attract thousands of investors who know little or nothing about the demerits of cyber investment.