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SEC Suspends Cryptocurrency-Related OTC Stock for False Claims

Last Updated March 4, 2021 3:50 PM
Neil Mathew
Last Updated March 4, 2021 3:50 PM

The Securities Exchange Commission (SEC) this morning suspended trading in the securities of American Retail Group, Inc (OTC: ARBG) as a result of allegations that the company made false statements involving cryptocurrency, including that it had partnered with an “SEC-qualified custodian.”

The accompanying statement  from the agency references two August 2018 press releases from the Nevada-based firm, wherein the company claimed that its cryptocurrency products would be offered “under SEC regulations” and that its token sale was “officially registered in accordance [with] SEC requirements.”

Cracking Down

This comes after both the SEC and Commodity Futures Trading Commission (CFTC) expressed concerns about the fact that more companies are making fraudulent claims regarding the organizations. Specifically, an investor alert  was issued from the two organizations’ respective offices, the SEC’s Office of Investor Education and Advocacy and the CFTC’s Office of Customer Education and Outreach. The agencies warned about the use of their seal, or advertising advance knowledge of the markets. In addition, the alert pointed out that officials from either agency would never suggest or demand payment, or endorse any investment, product, or service, in any way.

The SEC can suspend trading in a stock for 10 days, or until reporting requirements are met, according to federal law. Robert Cohen, Chief of the SEC Enforcement Division’s Cyber Unit, said of the suspension, “The SEC does not endorse or qualify custodians for cryptocurrency,” and cautioned investors to “use vigilance” with regards to initial coin offerings.

False Claims

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While many believe that the main issues with regards to trading in cryptocurrency are volatility and vulnerability to hacking , false claims about regulatory organizations seem to be a growing trend. Earlier this month, the CFTC filed charges against two men for actually impersonating regulators and forging documents in an attempt to deceive investors. The complaint, filed in the U.S. District Court for the Northern District of Texas, levied charges against two persons, Morgan Hunt and Kim Hecroft, and the complaint made clear that it was unsure whether the fraud involved two individuals, or one individual utilizing two aliases.

The defendants, who operated two businesses, called Diamonds Trading Investment House and First Options Trading, contacted clients and deceived them into believing that their funds could not be withdrawn unless a tax was paid to the CFTC. Hunt not only had an associate impersonate a CFTC investigator during a phone call conversation but also subsequently forged a document that bore the official CFTC seal.

The OTC sector is much different in that the companies are not required to disclose as much information as firms listed on securities exchanges, and the SEC had made similar investor warnings in the past regarding marijuana  in 2014, when many marijuana-related OTC companies were making false claims in their press releases.

Read the full order below:

American Retail Group Trading Suspension  by CCN.com  on Scribd

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