SEC: Crypto Founder Used ICO Funds for Dating and Rent
Eran Eyal was charged by the SEC this week for selling unregistered securities and improperly using the funds that he raised. Through his Initial Coin Offering (ICO), Eyal and his company UnitedData, using the name Shopin Tokens, raised $42 million. Since the rise of cryptocurrency in the past several years, there have been many instances of shady dealings by companies and its founders looking to capitalize on the huge interest and lack of regulation in the industry. We have written about numerous instances of this on our blog. Eyal lied about relationships that the company and the token had, and used some of the massive amount that he raised for personal uses, including over half a million dollars on rent, entertainment, and dating services. Eyal also hyped Shopin as having numerous big partnerships in the pipeline, and having a prominent cryptocurrency figure involved with the company.
In David Canellis’s article on thenextweb.com, he writes:
The SEC has charged Eyal and Shopin with violating the antifraud and registration provisions of US federal securities laws. If successful in its suit, an officer-and-director bar would be placed on Eyal, and he would also be restricted from participating in any future offering of digital asset securities.
Permanent injunctions, disgorgement with interest (which means repaying investors), and civil penalties are also being sought. Investors who contributed funds to the Shopin ICO are advised to contact the SEC, presumably for potential refunds.
With this action, there’s no doubt plenty of goons who raised money by hyping similarly non-existent “partnerships” getting very sweaty right about now. The SEC hasn’t forgotten.
It definitely seems that Mr. Canellis is correct in his assessment that the SEC is not going to overlook any ICOs that have been improperly conducted in the past few years. The SEC is well aware that this is an area ripe for fraud, and thus it seems that they are extra intent on catching those who have misused funds and misled investors in their dealings.
In their press release, the SEC stated: “As alleged in today’s action, the SEC seeks to hold Eyal and Shopin responsible for scamming innocent investors with false claims about relationships and contracts they had secured in support of a blockchain-based universal shopper profile,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “Retail investors considering an investment in a digital asset that meets the definition of a security must be afforded the same truthful disclosures as in any traditional securities offering.” This statement further shows that the SEC is intent on not allowing ICOs to skate around the traditional rules that protect investors.
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