The US SEC's Cyber Unit Launches Its First Fraud Case, Targeting PlexCoin's ICO

The US Securities and Exchange Commission launched a new cyber fraud unit earlier this year amid the internet's ongoing Bitcoin boom, seemingly telegraphing its intent to crack down on a cryptocurrency market rife with hacking, fraud and scams. The first thing on its agenda was likely always going to be initial coin offerings - a form of almost totally unregulated investment vehicle in which investors trade things of real value, such as cash, in exchange for stakes in cryptocurrency-backed startups.

Image: AP

Lo and behold, the SEC cyber unit's first case is yet another indication they plan on subjecting ICOs to the same securities laws as traditional investment products. Per Ars Technica, the agency has filed federal charges against PlexCorps operator Dominic Lacroix and his partner Sabrina Paradis-Royer, saying their PlexCoin ICO fraudulently raised up to $US15 million ($20 million) from investors with lies of 13-fold returns in less than a month. The SEC labelled Lacroix a "recidivist securities law violator" running a thinly-veiled scam.

According to Reuters, the SEC also said that it had obtained an emergency order to stop the ICO and freeze assets so they could attempt to refund investors.

Image: Screengrab via PlexCoin

PlexCorps had "no whitepaper available on its website," CNBC wrote. But PlexCoin's website touted the project as a "new revolutionary operating structure" that is "safer and much easier to use than any other current cryptocurrency". Without providing much explanation of how it supposedly would do so, the project offered users security from "market variation, which is highly volatile", as well as promised "guaranteed returns". It also claimed to be developing "PlexCard", a replacement for traditional credit and debit cards that would allow users to spend their money directly.

In a statement on Facebook, PlexCorps argued it was "being depicted as robbers, scammers and fraudsters everywhere in the media", and accused the press of "smearing our name with some allegations that can sometimes be false or misleading". It pledged to cooperate with the SEC as well as a separate investigation in Canada.

The majority of ICOs are likely not scams, just risky startup ventures. But as notorious Wall Street scammer Jordan Belfort noted a few months ago, it only takes a few crooks to scare off investors and tank the market. As CNBC wrote, ICOs slowed down in November due in part to fears of legal repercussions, though the ICO market has still sucked in billions of dollars of investments to date.

As the SEC moves on PlexCorps, other government agencies around the world are beginning to take cryptocurrency more seriously as well. The Internal Revenue Service recently won a court ruling forcing crypto exchange Coinbase to hand over customer records from 2013-2015, saying it believed Coinbase customers were failing to properly report gains when paying their taxes. Authorities in the UK and the European Union have reportedly become concerned that drug dealers and other organised crime groups are using Bitcoin ATMs to stash away illicit gains. China and South Korea have both banned ICOs outright. All this attention must have some people in the sector sweating.

[Ars Technica/Reuters]

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Comments

    ICO's pretty much are pyramid schemes.

      Not really. You could build a pyramid scheme with the tech, yes-- though the fact that it was a pyramid scheme would be publicly available from day dot.

      You could also (for example) build a platform to fix systemic problems in global democracy (see: https://horizonstate.com/), or create a more equitable and resilient way of distributing energy to households (see: https://powerledger.io/), or how about providing a cheaper and more direct way for folks to get their daily groceries without a handful of massive mega-corps taking a clip (see: https://ins.world/).

      I just worry that quick throw away comments like this train readers to react negatively to Blockchain tech in general, which is unhelpful and will slow the adoption of technologies that are literally world changing (for the better!).

      More power to the folks out there trying to make it harder for the scammers to manipulate the system, but lets not forget that there are always scammers and before you throw stacks of cash at someone you should absolutely do your due diligence, which should be much easier in an entirely public ecosystem.

      Last edited 07/12/17 9:21 am

    In light of the Plexcoin debacle, and also being 'cheated' as it seems with the SEC determining irregularities.

    I thought as a gesture to offer Plex's coins in the upcoming Invacio ICO which will become public in a short space of time.

    Unfortunately although it is common for me to be awake for 2-3 days on end i won't be able to respond to any questions here, however follow the links, join the group at the end, and coins will be distributed with invites, and fed out in batches, the group will be our main holding base for people for when we're ready to go active.

    https://www.coinagenews.com/?p=13618

    You can also obtain an understanding of Invacio at https://www.invacio.com before we release the white paper, including our invitation to address the United Nations, Invacio will launch post ICO on a array of releases of it's products, so the time frame will be much more robust than normally expected.

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