SEC Cracks Down On CoinDeal Scammers In $45 Million Fraud Case
It seems cryptocurrency scams are a dime a dozen these days, and the U.S. In their latest enforcement action, they have charged two individuals with orchestrating a fraudulent ICO scheme involving $45 million worth of digital assets!
Overview of the CoinDeal Scammers
In what may be the first case of its kind, the SEC has charged a group of individuals with running a fraudulent scheme involving the sale of digital tokens. The defendants are accused of using the popular cryptocurrency exchange CoinDeal to sell unregistered securities, and of lying to investors about the nature and source of the funds raised.
According to the SEC's complaint, the defendants raised over $12 million from investors by selling them digital tokens that were not registered with the Commission. The defendants allegedly told investors that the funds would be used to finance the development of a new cryptocurrency trading platform, when in reality they misappropriated nearly all of the funds for personal use.
The SEC is seeking disgorgement of ill-gotten gains, as well as civil penalties. This action underscores the Commission's commitment to protecting investors in digital assets and enforcing our rules against those who would commit fraud in this emerging space.
What Was the Alleged Fraud Scheme?
In January 2018, the U.S. Securities and Exchange Commission (SEC) charged a group of individuals with defrauding investors in a scheme involving the cryptocurrency trading platform CoinDeal.
The defendants allegedly raised over $12 million from investors by making false and misleading statements about the company, its business model, and the use of investor funds. They also allegedly created fake accounts on social media to pump up the price of the company's tokens.
As a result of the fraud, investors lost millions of dollars when the value of CoinDeal tokens plummeted. The SEC is seeking to recover these losses for investors.
How Did the SEC Catch On To The Scam?
The SEC began investigating CoinDeal after receiving a tip from a concerned investor. The investor had noticed that the company was making false and misleading statements about their business, as well as engaging in other suspicious activities.
After investigating the matter, the SEC found that CoinDeal had been running a Ponzi scheme. The company had been using new investor funds to pay out old investors, giving the appearance of profitability. In reality, however, the company was losing money and could not sustain its operations without continual infusions of new capital.
When the SEC uncovered the fraud, they froze all of CoinDeal's assets and brought charges against the company's founders. The case is still ongoing, but the SEC has already recovered millions of dollars for defrauded investors.