Before investing, knowing the identity and background of the person offering the security can be just as important as knowing the financial statistics of the company. The SEC recently charged a convicted felon with “raising over $30 million from hundreds of investors in a fraudulent initial coin offering (ICO).” The defendant “darkened his hair, grew a beard, and used aliases to hide his identity and conceal the fact that he had served a year in prison after pleading guilty to criminal charges . . .” He also represented one of his associates as being the owner of the company, and himself as only being an employee.
The complaint alleges that his company technology was being used and tested by several hedge funds, when in fact it had only been sent to them, but they were not using it yet. In this case, it might not have been possible for the investors to verify the claims of use by other hedge funds, but knowing the identity and background of the person offering the securities would have put them on notice about the possible risks involved.
Joseph G. Sansone, Chief of the SEC’s Market Abuse Unit said, “Learning about the identity and background of the individual or individuals behind a venture is one of the first things we tell investors to do before trusting anyone with their money.”
The complaint charges the defendant with “violating the antifraud and securities registration provisions of the federal securities laws and seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief. The SEC also seeks orders barring Manor and Pardo from acting as officers or directors of public companies and from participating in future securities offerings.” Criminal charges have also been filed by the U.S. Attorney’s Office.
The attorneys at Corporate Securities Legal LLP will assist you in the process of correctly identifying who is offering the securities you are considering. Although there is some hope for these investors to get some or all of their investment back, it is years in the process, and there are no guarantees of whether that will ever happen. An investment in precaution is always a profitable investment.
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