An investment advisor and convicted felon who offered digital coin investments he named "Tomahawkcoins" has agreed to stop making the offering and pay a fine, the Securities and Exchange Commission said Tuesday, prompting the regulator to issue a consumer warning to check the backgrounds of those offering old-fashioned investments disguised as innovative digital coin investments.
David T. Laurance of Irvine, Calif., and his company, Tomahawk Exploration LLC, have agreed to stop offering the penny stock and to pay a $30,000 fine imposed by the SEC without admitting or denying guilt. Laurance also agreed to never serve as an officer or director of a company.
The SEC’s order finds that Tomahawk and Laurance violated the registration and antifraud provisions of the federal securities laws.
Laurance was charged by the SEC with offering a fraudulent initial coin offering to fund oil exploration and drilling in Kern County California. Laurance and Tomahawk Exploration tried to raise $5 million through the sale of blockchain-based digital tokens called “Tomahawkcoins,” but failed to raise any money.
Promotional materials used by Laurance and his company included projections of oil production that were contradicted by the company’s own internal analysis and misleadingly suggested that Tomahawk possessed leases for drilling sites when it did not, the SEC said. In addition, Laurance described himself as having a “flawless background” when in fact he had a prior criminal conviction for his role in fraudulent securities offerings.
Tomahawk claimed that token owners would be able to convert the Tomahawkcoins into equity and potentially profit from the anticipated oil production and secondary trading of the tokens, which was also false, the SEC said.
Since the 1980s, Laurance has formed, raised capital for and served as an officer or director for several private and publicly traded oil and gas companies, including ones that offered penny stock, the SEC order said. In 1993, Laurance was convicted of mail fraud and providing false information to the SEC in a scheme to defraud investors in penny stock companies that he controlled.
“Investors should be alert to the risk of old-school frauds, like oil and gas schemes, masquerading as innovative blockchain-based initial coin offerings,” said Robert A. Cohen, chief of the SEC’s Cyber Unit.
The SEC’s Office of Investor Education and Advocacy issued an investor alert Tuesday encouraging investors to check the background of anyone selling or offering them an investment. Investors can use www.investor.gov and the Investor Bulletin to look for fraudulent schemes.
“No matter how good an investment may sound, verify that the person is currently registered or licensed and check his or her background,” the SEC said. “Investor.gov shows information about anyone who is registered and licensed, including information about criminal or civil legal proceedings, regulatory actions, customer complaints, employment terminations, and bankruptcy filings.”