The SEC filed a lawsuit to stop a planned ICO launch by a company that falsely claimed it had already obtained approval from regulators, including the fictitious “Blockchain Exchange Commission.”
Blockvest LLC claimed it received regulatory approvals for its fundraising from the Securities and Exchange Commission and other agencies, including the phony blockchain regulator, the SEC said in an Oct. 11 statement. The Blockchain Exchange Commission’s LinkedIn page lists the same address as the SEC’s Washington headquarters, and the entity’s two employees include Blockvest’s founder, Reginald Buddy Ringgold, III, who is also charged in the SEC’s complaint filed in a California federal court.
The fake commission’s mission is to “protect investors” and “regulate one critical part of the securities industry—Exchanges, Blockchain Start-Ups & ICO firms doing business with the public in the United States and aboard,” according to its LinkedIn page. Its activities include working to “write and enforce rules governing peer to peer” transactions in virtual currency markets.
The “Blockchain Exchange Commission’s” own website tells a slightly different story, listing a San Diego address also used for Blockvest’s address. The organization describes itself as an advocacy organization as well as a public sector actor.
The website also promotes its “compliance committee” to review and rank blockchain companies and virtual currency initiatives. Companies can become commission “members” for as little as $5,000 up to $50,000 in initial fees, according to the site.
Token Sale Halted
Those statements appear to have prompted the SEC’s fraud allegations. “We allege that this ICO is using both the SEC seal and a made-up crypto regulatory authority to trick investors into believing the ICO was approved by regulators,” Robert A. Cohen, Chief of the SEC Enforcement Division’s Cyber Unit, said in the release.
“The SEC does not endorse investment products and investors should be highly skeptical of any claims suggesting otherwise,” Cohen said.
Blockvest’s website said its “Private Token Sale has been halted until further notice,” without reference to the SEC’s action.
The SEC charged Blockvest and its founder Ringgold, who also used the name Rasool Abdul Rahim El, with fraud and securities registration violations.
The agency is asking the U.S. District Court for the Southern District of California to force the company to refund investors, pay penalties, and prohibit Ringgold from any future securities offerings, including digital securities.
Neither Blockvest, Ringgold, nor the Blockchain Exchange Commission immediately responded to requests for comment.
ICOs exploded in popularity during 2017 as a means for companies to offer digital tokens and assets in exchange for investors providing fiat or virtual currencies. Globally, ICOs are believed to have generated more than $6 billion in funding during 2017, according to the website icodata.io.
While global 2018 ICO funding has already surpassed the prior year, ICOs in the U.S. have since declined as the SEC has cracked down on them for potential securities laws violations, and as companies and investors await greater regulatory clarity from the agency.
The case is Securities and Exchange Commission v. Blockvest, LLC , S.D. Cal., No. 3:18-cv-02287, complaint filed 10/3/18 .
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