As the crypto industry grows, it sees more and more interaction with various regulatory bodies because it needs to adjust to the current financial climate as well as adhere to laid down rules to thrive around the world and one of these bodies is the United States Securities and Exchange Commission. The SEC and the crypto industry have a complicated relationship in that countless firms have applied to the SEC for a bitcoin ETF and have been repeatedly denied and the SEC has also been forced to regulate the industry, specifically ICOs, which became controversial a few years ago due to many of them being unregulated or outright scams.
Even though ICOs are not quite as popular as they used to be, the SEC is still having to deal with them as they recently filed a complaint against a New York-based businessman and his two companies under allegations that he ran an unregistered and fraudulent ICO from late 2017 to 2018.
The Long Arm of the Law
This SEC is not only filling an allegation against the firms but is also requesting that the US District Court issue a freeze on all related assets of the defendant. This was revealed by Heidelberg Research in an August 12, 2019 post with documents showing that the man in question is Reginald Middleton and the company is in questions are Veritasium Inc. based in New York and Vertsium LLC which is based in Delaware.
According to the SEC, $14.8 million was raised in an ICO from late 2017 to early 2018 and during that time, material misrepresentations and omissions were made to investors. It was also stated that around $8 million in investor proceeds remain from this ICO and thus, an immediate claim for relief has been requested another to freeze the defendant’s assets and get to the root of the issue.
In the course of this investigation a request, a request has also been put forward to prevent any the defendant from interfering in the SEC’s access to the relevant documentation they need by withholding or destroying it and also to allow it to take expedient discovery and escrow digital assets via a third party.
The ICO in question was done via to the selling of tokens called VERI that were issued on the ethereum blockchain and pegged to ether with a 30:1 ratio. According to the defendants, VERI was a utility token that could be redeemed for various benefits such as advisory services and consulting admin as well as access to limitless amounts of research.
Between this issue and the ongoing case with KIK, the SEC certainly have their work cut out for them and will not see the last of the crypto industry anytime soon