SEC Shuts Down Cryptocurrency Initial Coin Offering
If you are crypto-curious about investing, maybe you should save your real currency and just read this story.
The Securities and Exchange Commission is shutting down an initial coin offering by PlexCoin. In its first enforcement action, the SEC's cyber fraud unit alleges the offering is fraudulent.
It's a major development in the virtual currency market. The demand has been so furious, regulators have not known how to deal with it -- until now.
Bitcoin has been recognized as legal tender for years, driving its value from $22 in 2013 to $13,094 today. But the naysayers have warned it's a bubble that will surely pop.
For now, Dominic Lacroix is getting popped. In a federal complaint, the SEC calls him a "recidivist securities law violator." The government says his PlexCoin raised "up to $15 million from thousands of investors since August by falsely promising a 13-fold profit in less than a month."
While it is the first time the SEC has stopped an ICO, the agency has been warning consumers for some time. In July, the SEC ruled that a blockchain organization broke the law by offering shares to the public without complying with securities laws.
The government did not prosecute the founders, but the warning was clear: crypto-companies are not exempt from securities regulations.
The SEC has taken out crypto-criminals in the past. In 2015, the agency sued Homero Josh Garza for selling more than 10,000 "investment contracts representing shares in the profits they claimed would be generated from using their purported computing power to 'mine' for virtual currency."
It turned out to be an illegal pyramid scheme. His companies were hit with a $10 million judgment and he was ordered to pay nearly $10 million for wire fraud.
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