SEC Accuses 2 Firms of Crypto Pump-and-Dump Scheme

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Also: SEC Files Charges in a Crypto Asset Pump-And-Dump Scheme (Securities and Exchange Commission)

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Source: Coindesk

SEC Accuses 2 Firms of Crypto Pump-and-Dump Scheme

The complaint alleges the two companies pumped the price of their cryptocurrency by falsely claiming they had acquired $10 billion in gold bullion to back it.

By Nelson Wang
Sep 30, 2022 at 12:21 p.m. EDT
Updated Sep 30, 2022 at 12:41 p.m. EDT

The U.S. Securities and Exchange Commission has filed charges against Bermuda-based Arbitrade Ltd and Canada-based Cryptobontix, as well as their principals, for carrying out an alleged pump-and-dump scheme involving a crypto asset called “Dignity” or “DIG,” according to a press release.

According to the complaint, the two firms falsely claimed between May 2018 and January 2019 that Arbitrade had acquired and received title to $10 billion in gold bullion, and that the company planned to back each DIG token issued and sold to investors with $1 worth of this gold.

In reality, however, the SEC claims the gold acquisition transaction was a ruse to boost demand for DIG, allowing the company’s principals to sell at least $36.8 million of DIG, including to U.S. investors, at inflated prices.

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Read more: https://www.coindesk.com/policy/2022/09/30/sec-accuses-2-firms-of-crypto-pump-and-dump-scheme/

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Source: Securities and Exchange Commission

SEC Files Charges in a Crypto Asset Pump-And-Dump Scheme

Litigation Release No. 25537 / September 30, 2022
Securities and Exchange Commission v. Arbitrade Ltd., et al., Civil Action No. 1:22-cv-23171 (S.D. Fla. filed September 29, 2022)

The Securities and Exchange Commission today filed charges against Arbitrade Ltd., a Bermudan company, and Cryptobontix Inc., a Canadian company, and their principals, Troy R. J. Hogg, James L. Goldberg, and Stephen L. Braverman, and a so-called international gold trader, Max W. Barber, for perpetrating an alleged pump-and-dump scheme involving a crypto asset called "Dignity" or "DIG."

As alleged in the SEC's complaint, between May 2018 and January 2019, Arbitrade and Cryptobontix, through Hogg, Goldberg, Braverman, and Barber, issued announcements falsely claiming that Arbitrade had acquired and received title to $10 billion in gold bullion, that the company intended to back each DIG token issued and sold to investors with $1.00 worth of this gold, and that independent accounting firms had performed an "audit" of the gold and verified its existence. As alleged, Arbitrade claimed to have acquired the gold through a purchase transaction with Barber and his company, SION Trading FZE. In reality, according to the complaint, the gold acquisition transaction was merely a sham to boost demand for DIG, thereby allowing Hogg and Goldberg, with Braverman's assistance, to sell at least $36.8 million of DIG, including to U.S. investors, at prices fraudulently inflated by the public misstatements about the supposed gold acquisition.

The SEC's complaint charges the defendants with violating the antifraud and securities registration provisions of the federal securities laws. Specifically, the complaint alleges that: (i) Arbitrade and Cryptobontix violated Sections 5(a) and 5(c) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (ii) Hogg and Goldberg violated Sections 5(a), 5(c), and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5, and that Hogg is also liable as a control person for Arbitrade and Cryptobontix's violations of Section 10(b) and Rule 10b-5, and that Goldberg is also liable as a control person for Arbitrade's violations of Section 10(b) and Rule 10b-5; and (iii) Braverman and Barber aided and abetted violations of Section 10(b) Exchange Act and Rule 10b-5. The complaint seeks permanent injunctive relief, disgorgement plus prejudgment interest, and civil penalties against all of the defendants, and officer-and-director bars against the individual defendants. The SEC's complaint also names SION as a relief defendant seeking disgorgement plus prejudgment interest.

The SEC's investigation was conducted by David Staubitz and Crystal Ivory in the Miami Regional Office, and was supervised by Chedly C. Dumornay, Fernando Torres, and Glenn S. Gordon. The SEC's litigation will be led by Alice Sum and supervised by Teresa Verges. The SEC acknowledges the assistance of the Ontario Securities Commission.

https://www.sec.gov/litigation/litreleases/2022/lr25537.htm