Regulation
SEC Updates of the Week – Binance Objection, CoinDeal Scam, AGAC CFO Fined, and More
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This past week was a busy one for the Securities and Exchange Commission (SEC). During this time, we saw charges laid, fines issued, and objections filed. Here is a brief look at each.
Acquisition Objection
In response to the recent news of Binance.US acquiring over $1B in assets from Voyager, the SEC has filed what is being referred to as a ‘limited objection’ to the deal.
The purpose of this filing is to hit the ‘pause’ button on the transaction, until the SEC is provided with more details on how exactly it will occur. Notably the SEC is looking for increased clarity on the following points.
- How can/will Binance.US fund the deal?
- How will Binance.US be structured if allowed to be proceed?
- How will assets be secured throughout the process?
- What will happen if the deal is delayed beyond April 18th?
While we do not yet have the answers to these questions, a revised statement addressing each of the listed concerns is expected to be submitted in the coming weeks. This however may not be the end of the SECs curiosity if the pending statement raises further questions. The SEC states,
“The SEC reserves the right to amend this objection after the filing of the amended Disclosure Statement, and further reserves the right to object to confirmation of the Plan on these or any other bases.”
CoinDeal Introduced to Karma
While the SEC continues to look into the aforementioned deal, it also announced this week that it has officially charged a variety of individuals connected to a massive fraud known as CoinDeal.
This particular fraud involved the sale of over $45M worth of unregistered securities by 5 individuals and 3 associated companies.
- Neil Chandran
- Garry Davidson
- Michael Glaspie
- Amy Mossel
- Linda Knott
- AEO Publishing, Inc.
- Banner Co-Op
- BannersGo, LLC
The group being charged is alleged to have raised the capital from investors by promising to leverage blockchain technology to generate huge ROIs. Rather than utilize the capital as intended however, the group is believed to have misappropriated the funds for their own extravagant lifestyles. This involved purchasing real estate, boats, automobiles, and more.
The charges levied against this group include,
- violating the antifraud and registration provisions of the Securities Act and Exchange Act
- aiding and abetting violations of the antifraud provisions and Exchange Act
The SEC addressed the actions of CoinDeal, stating,
“We allege the defendants falsely claimed access to valuable blockchain technology and that the imminent sale of the technology would generate investment returns of more than 500,000 times for investors…As alleged in our complaint, in reality this was all just an elaborate scheme where the defendants enriched themselves while defrauding tens of thousands of retail investors.”
CFO of African Gold Acquisition Corp. Fined for $5M+ Theft
While acting as the CFO at African Gold Acquisition Corp. (AGAC), Cooper J. Morgenthau is alleged to have stolen more than $5M from the company and its investors.
The SEC list the following actions as being committed by Morgenthau,
- violating antifraud provisions of federal securities laws
- lying to auditors and accountants
- falsifying books and records
- filing fraudulent certifications with regulators
In its statement, the SEC states that it believes Morgenthau embezzled funds from multiple SPACs, funding his lifestyle and to purchase/trade cryptocurrencies. This particular scheme saw the accused hiding his activity through falsified documentation which was also provided to auditors of the company.
Inadequate Due Diligence
Although not yet publicly confirmed by the SEC, Reuters has recently indicated that investigations in to the collapse of FTX by the regulator do not end with the company itself. Rather, it is reported that its investigation is now extending to investors and their due diligence processes.
This is a question being raised by many, as FTX was funded by scores of influential companies and individuals from a variety of sectors. One would think that with so many eyes on the exchange, any illegal activity and poor practices would have been identified long-ago.
This situation could end up being doubly-bad for the scores of investors in the exchange, as they may end up having lost not only their investment capital, but held responsible for not acting in the best interest of their own investors.
