The United States Securities and Exchange Commission (SEC) has charged two companies, their executives and an alleged international gold trader, with running a fraudulent scheme to increase demand for their digital token.
The bogus promotion of the token generated net profits of more than $36 million for the defendants, the agency said.
A bogus $10 billion gold bullion takeover
According to a lawsuit filed Friday (September 30, 2022), a Bermuda company called Arbitrade, a Canadian company Cryptobontix, Troy Hogg, founder and owner of Cryptobontix, James Goldberg, Stephen Braveman, chief operating officer of Arbitrade, and Max Barber, a so-called international gold trader, ran an alleged pump-and-dump scheme involving a cryptocurrency called Dignity (DIG) from 2017 to 2019.
As stated in the SEC complaint, Hogg employed Russian developers in 2017 to create Dignity, an Ethereum-based token, which was owned and controlled by Hogg and Cryptobontix. The coin began “exclusively trading” on Livecoin, a Russian cryptocurrency trading platform.
Both Arbitrade and Cryptobontix claimed through advertisements that the former purchased and received $10 billion worth of gold bullion from SION, a company owned by Barber, with each of the three billion DIG tokens backed by $1 in Prayed.
The companies also claimed that they got an auditing firm to audit the gold as a way to boost investor confidence. However, the SEC alleged that both the gold purchase and the gold audit never occurred as they were tactics to get investors to buy the DIG tokens.
DIG token value dropped to zero
The SEC also claimed that Hog and Goldberg sold DIG on Livecoin at “artificially inflated prices,” resulting in total profits of $36.8 million. Interestingly, DIG was removed from the Livecoin platform as of February 2020 after the value of the token plummeted to zero.
As stated in the lawsuit, investors participated in what they believed to be an investment opportunity by committing their funds using bitcoin or any other crypto.
Consequently, the SEC is charging the defendants in the case with “violating the anti-fraud and securities registration provisions of the federal securities laws.” In addition, the regulator’s lawsuit seeks reimbursement of ill-gotten gains plus pre-trial interest, permanent injunctions, and civil money penalties.
In addition, the SEC is asking the court to issue a bar of officers and directors for all of the people named in the lawsuit.
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This post US SEC Charges Two Firms Over Alleged Cryptocurrency Pump-and-Dump Scheme
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