The US Financial Industry Regulatory Authority or FINRA has charged broker Timothy Tilton Ayre, owner of Rocky Mountain Ayre, with fraud and unlawful distribution of an unregistered cryptocurrency security HempCoin.
The agency, which operates as a non-governmental self-regulatory organization for investor protection and market integrity, said it is the first disciplinary action by FINRA involving cryptocurrencies.
In the complaint filed against Ayre, FINRA alleged that he attempted to lure public investment, from January 2013 through October 2016, in his company, Rocky Mountain Ayre, Inc. or RMTN by issuing and selling HempCoin. The coin was marketed as "the first minable coin backed by marketable securities". RMTN was quoted on the Pink Market and traded over the counter.
FINRA also alleged that Ayre bought the rights to HempCoin in June 2015 and repackaged it as a security backed by RMTN common stock. He marketed HempCoin as the world's first currency to represent equity ownership in a publicly traded company. He also promised investors that each coin was equivalent to 0.10 shares of RMTN common stock.
But he never registered HempCoin or applied for a registration exemption.
As per the complaint, investors mined more than 81 million HempCoin securities through late 2017 and bought and sold the security on two cryptocurrency exchanges.
Ayre also allegedly defrauded investors in RMTN by making materially false statements and omissions regarding the nature of its business, among other things.
The issuance of a disciplinary complaint represents the initiation of a formal proceeding by FINRA. Under the rules, the firm or individual named in a complaint can file a response and request a hearing before a FINRA disciplinary panel.
HempCoin is one of the first 30 cryptocurrencies developed in 2014.
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