Tuesday, 3 July 2018

SEC Charges Two In Illicit UBI Blockchain Stock Sale


The U.S. Securities and Exchange Commission has charged two Nevada residents with illegally profiting off stock sales from a self-described blockchain startup.
Attorney T.J. Jesky and business affairs manager Mark DeStefano allegedly made about $1.4 million in 10 days by selling shares in Hong Kong-based UBI Blockchain Internet, the SEC claimed in a press release Monday. The two received 72,000 restricted shares of the firm's stock last October, meaning they were to be sold at a specific price – $3.70.
However, the two allegedly sold the shares at prices ranging from $21 to nearly $50. The sales were halted when the SEC froze sales of the firm's stock entirely in early January, according to the release.
As reported by CoinDesk at the time, the agency cited unusual movement in UBI's share price and questions about its regulatory filings when it suspended trading of the stock.
In Monday's press release, Robert Cohen, head of the SEC Enforcement Division's Cyber Unit, called the case a "prime example" of why retail investors should be cautious about purchasing shares in "companies that suddenly claim to have a blockchain business."
He added:
"This case involved both a trading suspension and people holding restricted shares who attempted to profit from the dramatic price increase with illegal stock sales that violated the registration statement."
According to the SEC, both defendants have agreed to return the $1.4 million and pay a further $188,682 in penalties, as well as become subject to permanent injunctions. However, neither has admitted or denied the SEC's allegations.
The Financial Industry Regulatory Authority (FINRA), Mexican Comisión Nacional Bancaria y de Valores and the Panamanian Superintendencia del Mercado de Valores aided the SEC in investigating the sale, the U.S. regulator said.
SEC logo image via Mark Van Scyoc / Shutterstock
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The U.S. Federal Bureau of Investigation (FBI) is currently running 130 different cryptocurrency-related investigations, Bloomberg reported Wednesday.
FBI Supervisory Special Agent Kyle Armstrong told the Crypto Evolved conference in New York that the agency is investigating a variety of crimes, including human trafficking, drug transactions, kidnapping and ransomware, which have a cryptocurrency component, according to Bloomberg.
Further, there has recently been an uptick in cases involving cryptocurrencies, he said, citing opioids as one area where the bureau needs to focus on. Roughly 10 percent of drug users worldwide purchase drugs online in illegal digital marketplaces.
Some parts of the U.S. have also seen an increase in extortion schemes, where the perpetrators wish to use cryptocurrencies.
That being said, these "threat-tagged" investigations only make up a "small sliver" of the thousands of  cases the agency has, he said.
And unlike crimes involving cash, Armstrong said the blockchain's immutability makes it easier to track transactions. On the flip side, cryptocurrencies' anonymity or pseudonymity make it more difficult to properly investigate a crime.
FBI logo image via Kristi Blokhin / Shutterstock
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