The SEC is hard at work ousting, and holding accountable, those in the world of blockchain that have breached securities laws. Most recently, the SEC has turned their attention to an ICO hosted by a pair of companies operated by a duo of devious individuals.
- CG Blockchain Inc.
- BCT Inc.
This pairing of companies was marketed as developing technology to disrupt hedge funds, and the way they operate.
The Ring Leaders
- Boaz Manor (alias ‘Shaun Macdonald)
- Edith Pardo (alias ‘Edith Mehler’)
In all endeavours, it is believed that Boaz Manor was at the helm, with Edith Pardo acting as a ‘front-woman’, deflecting attention from Manor’s past.
In this particular case, the pair of companies, and the aforementioned individuals, are accused of facilitating/hosting a ‘fraudulent and unregistered offering of digital asset securities’.
$30 million worth of these securities were sold to investors, under the guise of a utility token ‘BCT’. Beyond simply selling illegal securities, those responsible flat out lied to their investors on a variety of fronts.
- Fake Identities
- Fake chain of command
- Product state of development
- Product Adoption
- Investments by founders
The list goes on. Simply put, they were not who they said they were, and the companies did not have a developed product gaining traction within the industry.
This next bit is not an everyday occurrence – rather, it was something you would see in a movie. Knowing full well that their activities were in violation of various securities based laws, Manor and Edith Pardo felt it prudent to hide their identities.
In order to do this, and distance themselves from their past activities (more on that, later), the pair went to great lengths. The SEC states,
“During the scheme, Manor employed a number of deceptive devices related to his fake identity and to the concealment of his background and role.”
Some of the tactics used to conceal their identities included dying hair, growing beards, attaining fake identification under the alias ‘Shaun MacDonald’, etc.
There are few reasons to justify hiding one’s identity in the manner that Manor did – either you’ve done something bad, or are doing something bad. In this particular case, Manor is guilty of both.
We’ve discussed the illegalities associated with his actions in the aforementioned ICO, however Manor has a history of such activity. Dating back to 2005 in Canada, Manor was found to be running a fraudulent hedge fund, valued at nearly $750 million.
When light was shed upon his operation, Manor proceeded to flee the great white north, becoming a fugitive in the process. After eventually returning, and completing a prison sentence of 1 year, Manor went on his way, staying out of the limelight until now.
Due to the great lengths gone to by the pair to partake in the aforementioned illegal activities, in addition to the sum of money raised, the SEC is taking a strong stance. The following is an excerpt from their court filing.
“Unless Defendants are restrained and enjoined, they will again engage in the acts, practices, transactions, and courses of business set forth in this Complaint or in acts, practices, transactions, and courses of business of similar type and object.”
The Securities and Exchange Commission is a United Stated based regulatory body, tasked with creating, an enforcing, regulation surrounding securities. The goal of which is to foster and maintain a fair, transparent, and efficient market for all participants.
Chairman, Jay Clayton, currently oversees company operations.
SEC Charges Opporty for 2018 ICO
This week, the Securities and Exchange Commission (SEC) continued its ICO crackdown. This time, the firm levied charges against project Opporty Founder and Brooklyn-resident Sergii Grybniak. The firm alleges that Grybniak broke the law when his firm raised approximately $600,000 during its 2018 ICO.
News of the charges first broke via Jan. 21 press release. In the release, the SEC reveals the charges laid against Grybniak in detail. Importantly, the primary charge is participating in the unregistered sale of securities. Additionally, the SEC claims that Grybniak made false statements in order to encourage more investor participation.
These statements include a myriad of exaggerated and completely fake claims. In one instance, Opporty claimed that its 2018 ICO was “100% SEC-compliant.” Unfortunately, this claim proved to be the tip of the iceberg. Apparently, Opporty also claimed to have thousands of “verified providers” who were ready to work with the platform.
This claim became so overblown that in one piece of marketing material, Opporty suggested it had a business database that included around 17 million participants. In actuality, the firm had no partnerships. Unfortunately, these claims served one main purpose, to push more investment capital into the ICO.
Major Software Firm
As if the shower of lies put forth weren’t enough, Opporty also made some very specific partnership claims that proved to be bunk as well. According to the SEC, the firm lied about a partnership with a major software company. This lie was to help ease investor doubt about the ability of developers to deliver on their hefty platform promises.
SEC Steps In – Opporty
It doesn’t take much research to see why Opporty ended up in the SEC’s crosshairs. Now, the SEC seeks injunctions against all future digital offerings by the company. On top of the cease-and-desist, regulators require Opporty to return all the funds the company raised during its 2018 ICO. Also, the firm is to face a variety of civil penalties for its actions.
Opporty executives sold the concept to investors as a blockchain-based ecosystem for small businesses. The platform was to provide these small-to-medium sized companies with access to advanced blockchain systems. For example, businesses could list their services and lock in their clients via smart contracts.
United States Investors
Aside from the obvious scamming that took place, Opporty made another key error in its strategy. You see, unlike many similar ICOs, the offering did not explicitly exclude U.S. investors from participating. The 2018 ICO included investments from around 200 US citizens. In this way, the firm invited the SEC to monitor its actions throughout its entire crowdfunding campaign.
An Oppurty Lost
Given the long list of violations this firm now faces, it’s easy to imagine a scenario in which Opporty decides to close its doors. Already, numerous SEC-charged firms have taken similar measures prior to refunding clients’ funds. For now, Opporty has a long legal battle and hefty fines to deal with. You can expect to hear more from this case as the SEC pursues its charges against Grybniak.
EMURGO Starts New Blockchain Task Force in Uzbekistan
This week, the blockchain arm of Cardano, EMURGO announced the creation of a special task force to assist the Uzbekistani government with security token integration. The newly developed team’s tasks will include researching, developing, and instituting new security token solutions into the market. Additionally, the team will guide Uzbeki officials on the creation of a regulatory framework to support a shift towards digital assets within the country’s financial sector.
News of the new taskforce first emerged via Cardano’s official blog. In the post, the company announced the creation of its new “strategic blockchain task force.” The post took a moment to describe the overall goals of the group. These goals include the development of a legal framework for STOs and security token trading. As such, the team will need to complete its market research in order to determine the best pathway towards providing solutions for the security token market locally.
Given the remarkable size and importance of the task at hand, it’s no surprise to learn that EMURGO made important strategic partnerships. To date, the firm works with the government of Uzbekistan’s National Agency of Project Management (NAPM), Infinity Blockchain Holdings and the KOBEA group.
KOBEA – Blockchain Education
Notably, the Korean-based blockchain firm, KOBEA will assist EMURGO in the development of an educational structure. The new blockchain-based courses will be available at universities and community centers in the very near future. This structure is necessary to further the local markets’ access to blockchain professionals.
Discussing the importance of the partnerships, the CEO of the EMURGO Group, Ken Kodama took a moment to express the “great honor” his firm feels after receiving the official go-ahead with the project. He also explained why Uzbekistan is one of the best places for blockchain development to occur. Notably, he touched on the government’s willingness to push the adoption of new technology. He even stated that “Uzbekistan is more willing than ever to adopt innovation.”
For its part, EMURGO will provide advisory services to the Uzbek government. Additionally, the firm will look into how to best integrate Cardano’s third generation blockchain into infrastructure projects. Blockchain infrastructure projects are on the rise. Despite the unprecedented growth within the sector over the last year, many analysts still see a lack of infrastructure as the main choke point towards full-scale blockchain adoption.
EMURGO and KOBEA
Interestingly, both EMURGO and KOBEA will provide additional insight into the digital asset banking markets. This data, coupled with a new educational initiative across all major Uzbek universities, should provide the country with a treasure trove of highly-trained professionals.
Cardano continues to impress with its 4th generation blockchain’s capabilities. Now, it appears that the firm has caught the attention of more than just your typical crypto investors. Given the sheer magnitude of its latest project, you can expect to see Cardano remain dominant in the crypto space for years to come.
Oklahoma Lawmaker Nathan Dahm Sponsors Bill 1430
On Jan. 15 an Oklahoma Lawmaker by the name of Senator Nathan Dahm introduced Senate Bill 1430. The goal of the bill is to facilitate the creation of a state-chartered financial institution focused solely on digital assets. The newly created crypto depository would be exclusively for government use. Additionally, the depositary would take up the responsibility of providing financial and technical services to government offices utilizing digital assets.
According to recent reports, Senator Nathan Dahm sponsored the bill in a bid to get further blockchain integration into the government. Importantly, the bill will see a Feb. 3 first reading. Notably, this is the latest of three crypto-related bills Senator Dahm has brought forth over the last year.
Oklahoma Has Some Pro-Blockchain Officials
Senator Dahm has been one of the most active politicians in the space. His vocal support for the creation of a functioning and enforceable regulatory framework for tokenized securities received heavy media coverage throughout 2019. For example, on Jan. 25, 2019, he introduced Senate Bill 843. The bill borrowed many aspects from HB 70 that was passed by the Wyoming legislature last year. The overall goal of the new legislation is to help differentiate between open blockchain cryptocurrency transactions and tokenized securities. Unfortunately, there has been no further action taken on this bill.
Additionally, Dahm co-authored Senate Bill 700. This bill focuses on digital signatures and their use within the digital economy moving forward. In essence, the bill modifies the definition of an electronic record and electronic signature to fit the coming digitization of the economy.
Senate Bill 1430 – Oklahoma
While both of these bills could have far-reaching ramifications for crypto use within the state, his latest venture is by far his most advantageous. Senate Bill 1430 Dahm’s authorizes the State Banking Department and the Oklahoma Department of Commerce to work together to research, formulate and develop a new-age financial institution. This state-chartered digital asset bank is to function as Oklahoma’s primary central depository for all virtual currencies used by agencies within the state.
The new financial institution must meet some stringent requirements before its official opening. For one, the bank must integrate into existing banking and financial institution regulations. Also, the institution must encompass the highest level of expertise. In this way, the firm may provide valuable financial and technical services to blockchain and virtual currency innovators and developers moving forward.
Oklahoma – A Blockchain Haven?
These latest development highlight the unbalanced approach by state officials towards blockchain technology. Oklahoma continues to lead the pack in terms of legislation aimed at integrating this game-changing technology. This latest bill should help safely grow this innovative technology within the state.
The data gathered to date surrounding the market will help in the development of next-generation financial products in the future. As it stands today, the plans and implementation strategy submission must occur by July 1 in order for the bill to become effective by Nov. 1, 2020.
Oklahoma – A Step Ahead of the Pack
The decision of lawmakers such as Dahm to continually push for more blockchain adoption is a smart maneuver. The state could see an unprecedented upside if it becomes one of the first to provide a strong regulatory framework to the blockchain space. For now, lawmakers like Dahm continue to push for stronger regulations to promote the adoption of this revolutionary technology.
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