SEC Refocuses on Enforcement of Crypto-Fraud
For some time now, the Securities and Exchange Commission (SEC) has been signaling its intention to pursue firms that it believes are capitalizing on the excitement and novelty of cryptocurrencies by engaging in illicit conduct. Not surprisingly, the SEC has followed through on that promise. On August 29, 2019 the SEC announced that it has reached a settlement with a Dallas-based cryptocurrency dealer called Bitqyck to the tune of $10.1 million.
According to the SEC’s complaint, the company and its founders, Bruce Bise and Sam Mendez, defrauded investors and operated an unregistered exchange. The complaint alleged that Bitqyck marketed two digital tokens, Bitqy and BitqyM, to prospective investors in 45 US states, two US territories, and 20 countries through multiple unregistered digital asset securities offerings.
According to the SEC, the company raised more than $13 million from more than 13,000 investors who collectively lost over two-thirds of their investments. The defendants allegedly falsely represented to investors that if they purchased a Bitqy token, they would automatically receive one-tenth of one share of Bitqyck common stock through the operation of a “smart contract” associated with the token. In truth, however, there were no such “smart contracts” and the investors never received any Bitqyck common stock.
Further, the defendants falsely claimed that Bitqyck owned a cryptocurrency mining facility in the state of Washington from which investors could profit. In reality, Bitqyck did not have access to discounted electricity and didn’t own any mining facility. It was also reported that they created an online trading platform called TradeBQ, which they failed to register with the SEC.
Bitqyck, aided by its founders, also is alleged to have illegally operated TradeBQ, an unregistered national security exchange offering trading in a single security, Bitqy.
To read the complete SEC press release, click here.