SEC Freezes Millions to Thwart Massive Digital Currency Scam

Isaac Cain
December 6, 2017

In the first case to be filed by the U.S. Securities and Exchange Commission's new cybercrime unit, two residents of Canada have been charged with misappropriating $15 million from investors through a fraudulent initial coin offering. From a quick glance, it does not seem to provide any differentiating reason why anyone should invest in their ICO, but promises were seemingly made that token amounts would just increase as well as suggestions of 1,000% profits.

The SEC filed charges against a recidivist Quebec securities law violator, Dominic Lacroix, and his company, PlexCorps.

In July 2017, at the request of the AMF, the Financial Markets Administrative Tribunal had issued orders against Lacroix and PlexCorps, PlexCoin, DL Innov Inc. and Gestio connection with their activities relating to an investment in the purchase of PlexCoin, a virtual currency.

Using Facebook, the company sold securities called PlexCoin - which its Web site billed as "the next cryptocurrency" - to investors in the United States and elsewhere, raising US$15 million since August, and promising a return of 1,354 percent within 29 days, the SEC said in a statement.

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The charges were the first to be filed by the SEC's Cyber Unit, a newly formed group tasked to closely watch ICOs, among other digital innovations that could possibly harm investors.

The SEC is seeking a permanent injunction, a judgement ordering the defendants to disgorge the profits with interest and to pay financial penalties, the agency said.

As per the SEC complaint, Lacroix, Paradis-Royer, and PlexCorps have been charged with violation of anti-fraud provisions.

Also, Lacroix appears on CSA's disciplined list for "illegal or unregistered distributions", for which he was fined $12,000 on February 28, 2013. In February 2013, Lacroix and his then company Micro-Prêts pleaded guilty before the Court of Quebec to six charges of illegal distribution, illegal practice and misrepresentations. The Cyber Unit was put together in September of this year in order to focus the SEC's enforcement arm on, "misconduct involving distributed ledger technology and initial coin offerings, the spread of false information through electronic and social media, hacking and threats to trading platforms", according to the press release. The SEC would also have Lacroix and Paradis-Royer barred from offering digital securities, and have Lacroix barred from holding officer-and-director positions.

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