Chicago Business Attorney Blog
Cryptocurrencies like Bitcoin have been spreading like cyber-kudzu during the past couple of years in certain corners of the online investing world. More cautious investors still might be hanging back to make sure they’re not a crypto-bubble. And now all investors have a reason to hesitate: a series of legal and regulatory investigations that call into question their stability as investments.
Among the recent developments that could give would-be investors pause:
- The U.S Securities and Exchange Commission in May announced that it had secured injunctive relief to halt alleged “ongoing fraud” by an unregistered, non-exempt Initial Coin Offering (ICO) that had raised as much as $21 million in cryptoassets. Titanium Blockchain Infrastructure Services, Inc., EHI Internetwork and Systems Management, Inc., and Michael Stollery, a self-described “block chain evangelist,” were collectively accused of fraud in connection with purchase, offer or sale of securities under both the Securities Exchange Act and the Securities Act. The SEC alleged that the defendants created a digital asset known as BAR and TBAR tokens, orchestrated a social media campaign based on false corporate relationships—including, most egregiously, a supposed link with the Federal Reserve Bank—and false testimonials to show their supposed expertise. The complaint further alleged that the group of defendants had generated demand by offering various incentives and creating a sense of urgency, then inflated the price of the tokens on the secondary market in a “pump and dump,” or “create and inflate” scheme. Such schemes are seen as a widespread problem on crypto-exchanges.