SEC Charge Two Individuals for Illegal Sale of Blockchain Firm Stock
The SEC has forced two ETFs to drop the term 'blockchain' from their tickers. | Source: Shutterstock
The Securities and Exchange Commission charged an attorney and a law firm business manager yesterday on with profiting from illegal stock sales of a company claiming to have a blockchain-related business.
Attorney T.J. Jesky and the business manager of his law firm Mark F. DeStefano are alleged to have made approximately $1.4 million in sales from selling shares in UBI Blockchain Internet, Ltd. between 26 December 2017 and 5 January 2018. The SEC then temporarily suspended trading in UBI Blockchain stock over concerns that the claims made within the SEC filings were inaccurate as well as “unusual and unexplained market activity”.
“This case is a prime example of why the SEC has warned retail investors to be cautious before buying stock in companies that suddenly claim to have a blockchain business,” said Robert A. Cohen, Chief of the SEC Enforcement Division’s Cyber Unit. “This case involved both a trading suspension and people holding restricted shares who attempted to profit from the dramatic price increase with illegal stock sales that violated the registration statement.”
Nevada residents Jesky and DeStefano are said to have received 72,000 restricted shares of UBI BLockchain stock in October 2017 under the agreement that they could sell the shares for $.70 each as per the registration statement. However, the pair are now accused of selling the shares well above market prices to make an illegal profit, with prices ranging from $21.12 to $48.40 during an unusual price spike in UBI Blockchain stock.
The SEC filed a complaint in a New York federal court charging Jesky and DeStefano with violation of the registration provisions of the federal securities laws. The pair have agreed to return $1.4 million, pay $188,682 in penalties, and to be subject to permanent injunctions following the case. However, at this time they have neither admitted nor denied the allegations that they engaged in illegal stock sales.
The investigation is being coordinated by the Microcap Fraud Task Force and Cyber Unit. The case is the most recent in a long string of actions taken by the SEC involving blockchain and cryptocurrency related crimes falling under their jurisdiction – the government regulator has issued over 80 subpoenas to cryptocurrency firms this year and charging multiple ICO founders with fraud and other illegal activities as the group works towards determining which cryptocurrency tokens will be classified as securities.
The classification could make a major impact on the market, potentially resulting in the retroactive prosecution of ICO founders and even investors found to have been selling securities described at the time as utility tokens attached to developmental stage crypto-blockchain platforms.
Featured image from Shutterstock.
