The US SEC sues two crypto firms for an allegedly fraudulent scheme that involved the purchase and sale of Gold on Livecoin from 2017 to 2019.
The US Securities and Exchange Commission (SEC) alleges that two firms participated in a fraudulent scheme. The regulatory body claims that the firms made false claims and misrepresentations that attracted investigations into fraudulent schemes.
The accused included the two companies, their executives and an international gold trader of scamming investors.
The alleged gold scam
The false promotion of the token netted proceeds of over $36 million for the defendants. A Bermuda-based company called Arbitrade, an international gold trader and a Canadian firm, Cryptobontix were involved.
Max Barber, the gold trader, and Trey Hogg of Cryptobontix set up the scheme. The scheme also involved Stephen Braveman and James Goldberg of Arbitrade.
The international gold trader ran an alleged pump and dump scheme. The scheme involved a cryptocurrency dubbed Dignity (DIG) from 2017 to 2019. The coin began trading exclusively on Livecoin.
The Russian crypto trading platform, Livecoin, hosted several Russian developers. Hogg employed Russian developers in 2017 to create Dignity. Dignity represents an Ethereum-based token.
Both Hogg and Cryptobontix own and control the Dignity token. Apparently, both Cryptobontix and Arbitrade claimed that Arbitrade purchased and owned gold.
The history of dignity tokens
Arbitrade purchased and received gold worth $10 billion from SION. SION, the company owned by Max Barber handled the transaction. Each of the three billion DIG tokens was backed by $1 worth of gold.
Both companies claimed that they organized a gold audit by hiring an auditing firm. However, SEC reiterated that both the gold purchase and the gold audit never occurred.
The commission believes that the companies used these tactics to lure investors into buying DIG tokens. SEC further alleged that Goldberg and Hogg sold tokens on Livecoin.
These tokens, SEC claims, were sold at artificially inflated prices. The ultimate result summed up to $36.8 million in total proceeds.
Surprisingly, in February 2020, the delisting of Livecoin happened. Delisting resulted from the DIG’s poor performance in the market. The token’s value plummeted to zero.
SEC issued directive
SEC will charge the defendants in the case with a violation of the anti-fraud and securities registration laws. The regulator, in addition, seeks to ensure repayment of ill-achieved gains.
The repayment will encompass permanent injunctive relief. The repayment package will also comprise civil monetary penalties.
Apparently, the lawsuit argues that investors committed their funds to the fraudulent scheme. The investors committed their funds using bitcoin and other forms of crypto.
Therefore, the Securities and Exchange Commission seeks to issue an officer and director bar. The directive by the commission will target all individuals named in the lawsuit.
The regulator continues to pave the way for crypto regulation by ensuring that crypto exchanges and other crypto firms follow the law. By following this trajectory, the commission will secure investors from such fraudulent schemes.
