The organizers of an allegedly unregistered offering of digital asset securities settled SEC charges of defrauding investors out of millions of dollars.
As previously covered, the SEC charged Reginald Middleton (a "self-described financial guru") and his company Veritaseum with violating the registration, anti-fraud and manipulative trading provisions of the U.S. federal securities laws. The SEC claimed that Mr. Middleton knowingly (i) created false investor demand for "VERI" tokens, (ii) engaged in manipulative trading, and (iii) made falsified statements of having a product ready to generate revenue even when there was no such product. Further, the SEC alleged that Mr. Middleton transferred a "significant" amount of dissipated assets from investors into his personal account.
Without admitting to or denying the allegations, Mr. Middleton and Veritaseum agreed to (i) cease all further violations of the registration, antifraud and manipulative trading provisions of the U.S. federal securities laws, (ii) not participate in any digital-securities offerings, and (iii) disgorge $7,891,600, plus $582,535 in prejudgment interest. In addition, Mr. Middleton agreed to pay a $1,000,000 civil penalty and will be permanently banned from serving as an officer or director of a publicly-traded company.
Commentary Christian Larson
It is notable that this ICO fraud enforcement action has resulted in the creation of a mechanism to compensate victims. Many other ICO fraud victims have not been so fortunate.
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