In a story that is getting all too familiar recently, the Securities Exchange Commission (SEC) halted trading on yet another blockchain-related company stock, UBI Blockchain. The SEC explained:
"The Commission temporarily suspended trading in the securities of UBIA because of (i) questions regarding the accuracy of assertions, since at least September 2017, by UBIA in filings with the Commission regarding the company’s business operations; and (ii) concerns about recent, unusual and unexplained market activity in the company’s Class A common stock since at least November 2017."
Shares in UBI Blockchain traded as high as $115 after selling for just $0.55 less than a year ago; a couple of weeks ago it was trading at around $9. Bloomberg is reporting that UBI Blockchain has just 18 employees, no revenue, $15,406 dollars in cash on hand and $6.3 million in debt. UBI filed with the SEC in September 2017 for a planned sale of 72.3 million shares of stock by its executives, but the phone number listed in the filing has since been disconnected. The share halt started January 8, 2018, and will run through January 22, 2018.
Latest in a Series of Scam Crackdowns
On December 19, 2017, the shares of The Crypto Company were halted by the SEC over concerns of manipulative trading. The shares had surged in price by 2700 in a single month. The halt went through January 3, 2018, which saw the stock drop to $175 from its high of $642. Their 10-Q filing shows cause for concern: The company, which rebranded in July of 2017, had less than $600,000 in revenue, most of which was from trading cryptocurrency. The stock at its highest gave this company with seemingly few people and no product, a market cap of $6.5 billion.
Also in December, the SEC halted both the Munchee ICO and the Plexcoin ICO. Munchee ran afoul of the SEC by emphasizing they were creating a secondary market as an investment vehicle long in advance of the utility of the token being made available. The SEC complaint argued their token was considered a security regardless of their utility at the time of the sale. Munchee consented to the SEC’s order without admitting to or denying the findings and returned the investors’ money.
The SEC took a much heavier hand with Plexcoin, as their new Cyber Unit filed its first charges since being created in September 2017 to focus on misconduct involving distributed ledger technologies (DLTs) and initial coin offerings (ICOs). The scheme involved a recidivist Quebec securities law violator, Dominic Lacroix, and his partner, Sabrina Paradis-Royer.
The SEC obtained an emergency court order to freeze the assets of PlexCorps, Lacroix and Paradis-Royer. Chief of the Cyber Unit, Robert Cohen, said, "This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing. We acted quickly to protect retail investors from this initial coin offering's false promises."
In September 2017, the SEC had a double hitter with two companies from one person, Maksim Zaslavskiy. He was responsible for REcoin, touted as "the first ever cryptocurrency backed by real estate," and the Diamond Reserve Club. Neither company performed any of the actions that they claimed they would and neither had any of the resources touted. The SEC obtained an emergency court order to freeze the assets of Zaslavskiy and his companies.
Just today, we have news breaking that the CEO of Fantasy Markets, Jonathan Lucas, has allegedly disappeared with investors' money.
The SEC has also issued a statement concerning celebrity endorsements of ICOs out of concern for naive potential investors who may be swayed by big names selling dubious products.
Since the SEC started to pay attention to ICOs last summer, they’ve been taking a pretty understanding stance when dealing with enforcement. Andrew J. Chapin, the CEO of Benjacoin for example, describes how the SEC contacted him about his upcoming ICO in order to discuss what he and his company were planning. He says that he was glad he took the call and learned the “right way” to do things, instead of ignoring it and trying to skirt around the regulations. Thus, in these early days, it appears that the SEC is giving companies an opportunity to make things right, so far, without assessing fines or penalties. But how long that will last is anyone’s guess right now.