SEC Charges AML BitCoin CEO with Fraud
The US Securities and Exchange Commission has announced that it has charged NAC Foundation, its Chief Executive Officer Marcus Andrade, and political lobbyist Jack Abramoff with conducting a fraudulent, unregistered offering of AML BitCoin, a digital asset security the defendants claimed was a new and improved version of bitcoin.
The SEC alleges that NAC Foundation raised at least USD5.6 million from over 2,400 investors by selling tokens that could later be converted to AML BitCoin, the SEC said in a press release.
According to the SEC’s complaints, NAC and its CEO portrayed AML BitCoin as superior to the original bitcoin, with anti-money laundering, anti-terrorism, and theft-resistant technology built into the coin on NAC’s own ‘privately regulated public blockchain’.
The SEC's complaints allege that in reality none of the touted capabilities existed and the development of AML BitCoin and its blockchain was in the very early stages.
According to the SEC, NAC and Andrade falsely claimed that multiple government agencies were negotiating to use AML BitCoin, and Abramoff and Andrade falsely claimed that they were on the verge of advertising AML BitCoin during the Super Bowl in an effort to create interest in the offering, despite NAC being unable to afford the cost of the ad. Abramoff also allegedly arranged for NAC to pay for purportedly independent articles about AML BitCoin that included many of the misleading statements.
The SEC further alleges that Andrade directed a market manipulation strategy to boost the token’s trading volume and price and diverted approximately USD1.1 million from the offering for his personal use.
Kristina Littman, Head, Cyber Unit, Enforcement Division, SEC, said: “We allege that these defendants repeatedly misled investors into funding non-existent technology, falsely claiming that the technology would make digital asset transactions more secure. Investors are entitled to truthful information so they can make fully informed investment decisions.”
The US Attorney’s Office for the Northern District of California announced parallel criminal actions against Andrade and Abramoff, charging Andrade with wire fraud and Abramoff with conspiracy to commit wire fraud and lobbying disclosure violations.
The SEC’s complaints, filed in the Northern District of California, charge NAC, Andrade, and Abramoff with violating the antifraud and securities registration provisions of the federal securities laws, and also charge Abramoff with broker-dealer registration violations. The SEC seeks permanent injunctions, disgorgement, and civil penalties, as well as injunctions prohibiting NAC and Andrade from participating in future securities offerings, and barring Andrade from serving as a public company officer or director.
Abramoff has agreed to a settlement imposing permanent and conduct-based injunctions, officer-and-director, industry, and penny stock bars, disgorgement of the USD50,000 in commissions he received, plus prejudgment interest of USD5,501, and reserves the issue of civil penalties for further determination by the court upon motion of the SEC. The settlement is subject to court approval.