ICO

SEC Slaps 'Fraudulent' ICO Founder With $30K Fine, Lifetime Ban

by Stan Higgins and Nikhilesh De

Posted  52 Views updated 3 months ago

The U.S. Securities and Exchange Commission (SEC) announced Tuesday that it had secured new prohibitions against the founder of a company behind an allegedly fraudulent initial coin offering (ICO).

The agency said that it obtained officer-and-director and penny-stock bars against David Laurance and his company, Tomahawk Exploration LLC. Tomahawk, the SEC alleges, sought to raise funds through a "Tomahawkcoin" token sale that utilized misleading marketing materials and false claims about oil drilling licenses.

Further, the Tomahawkcoin is said to have been sold along with the false promise that "token owners would be able to convert the Tomahawkcoins into equity and potentially profit from the anticipated oil production and secondary trading of the tokens," according to the SEC's statement on the matter.

According to the Tuesday announcement, Laurance has neither admitted nor denied the SEC's allegations but he and the company have agreed to the bars along with a $30,000 penalty.

The officer-and-director bar prevents Laurance from serving in either capacity in a public company, while the penny stock bar prevents him from trading or owning penny stocks. Both prohibitions are permanent, according to the SEC.

"Investors should be alert to the risk of old-school frauds, like oil and gas schemes, masquerading as innovative blockchain-based ICOs," Robert Cohen, who leads the SEC's Cyber Unit, said in a statement.

Notably, the SEC order indicates that the agency is now scrutinizing token distributions for marketing purposes, calling into question whether airdrops (or free dispersals of tokens) constitute securities sales.

As the agency noted:

"...Tomahawk issued tokens as part of the Bounty Program to generate interest in the ICO, which benefited Tomahawk. Distribution of tokens that are securities in exchange for promotional services to advance the issuer's economic objectives or create a public market for the securities constitute sales for purposes of Section 5 of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder."

SEC emblem image via Shutterstock

source: https://www.coindesk.com/sec-slaps-fraudulent-ico-founder-with-30k-fine-lifetime-ban/


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