The U.S. Securities and Exchange Commission won an emergency asset freeze to stop an initial coin offering that the agency said has defrauded investors by promising a 13-fold profit in less than a month.
The asset freeze was granted as the SEC sued Dominic Lacroix and his company PlexCorps in federal court in Brooklyn, the agency said in a statement on Monday. The firm and Lacroix, described by the SEC as a recidivist securities law violator, have raised $15 million since August marketing and selling a product called PlexCoin over the Internet, according to the statement.
The case is the first brought by a new SEC unit created in September to focus on misconduct involving distributed ledger technology and initial coin offerings.
“This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing,” said Robert Cohen, head of the SEC’s Cyber Unit. “We acted quickly to protect retail investors from this initial coin offering’s false promises.”
Lacroix and PlexCorps violated U.S. laws by failing to register the offering and not disclosing his history of involvement with probes by Canadian authorities, the SEC said. The agency also sued and froze the assets of Sabrina Paradis-Royer, described as Lacroix’s romantic partner. The suit seeks fines and disgorgement from them as well as a ban on their participation in offerings of digital securities.
The SEC warned the industry in July that if these tokens are effectively securities such as stocks or bonds, they must be registered with the agency. In August, the regulator warned individual investors of the risks in buying the tokens, cautioning that scammers are using them to lure investors into old manipulation schemes such as penny-stock pump-and-dump scams.
This article was provided by Bloomberg News.