The U.S. Securities and Exchange Commission (SEC) has halted an ongoing fraud involving an initial coin offering (ICO) run by Titanium Blockchain Infrastructure Services Inc. that raised as much as $21 million from investors in and outside the U.S.
The SEC obtained a court's temporary restraining order to halt the fraudulent ICO and for an emergency asset freeze. The court also ordered the appointment of a receiver for Titanium while the SEC continues its investigations.
The SEC's complaint was filed on May 22 in Federal district court in Los Angeles. It charges Titanium and its President Michael Stollaire of violating the antifraud and registration provisions of the federal securities laws.
The SEC alleged that Stollaire lied of having business relations with the Federal Reserve, numerous corporate clients and dozens of well-known firms such as PayPal, Verizon, Boeing, and Walt Disney, in order to promote the ICO.
Stollaire, a self-described "blockchain evangelist" is also charged of putting up fabricated testimonials from corporate customers for supporting the ICO on the company's website. Further, he ran ICO promotions through videos and on social media, while equating it to like investing in "Intel or Google."
"This ICO was based on a social media marketing blitz that allegedly deceived investors with purely fictional claims of business prospects," said Robert Cohen, Chief of the SEC Enforcement Division's Cyber Unit.
Additionally, the SEC has also charged another Stollaire company, EHI Internetwork and Systems Management Inc., with violating the antifraud provisions.
The SEC seeks preliminary and permanent injunctions, return of allegedly ill-gotten gains plus interest and penalties, and a ban on Stollaire from participating in offering digital securities in the future.
"Having filed multiple cases involving allegedly fraudulent ICOs, we again encourage investors to be especially cautious when considering these as investments," added Cohen.
The SEC is putting in all its efforts to educate investors on the risks involved with cryptocurrencies and ICOs. It has issued an Investor Bulletin on ICOs and even ran a mock ICO earlier in the month in an effort increase consumer awareness.
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