SEC Files Charges in PlexCoin ICO

Cryptocurrency  •  Enforcement Actions  •  Initial Coin Offerings  •  SEC

On December 4, 2017, the Securities and Exchange Commission (the “SEC”) announced that it has filed charges against two individuals for their roles in the initial coin offering (“ICO”) of PlexCoin Tokens. The SEC charged Dominic Lacroix and Sabrina Paradis-Royer with engaging in an ongoing securities fraud and the unlawful sale, and offer to sell, unregistered securities in violation of the Securities Act of 1933. The SEC claims that Lacroix violated a 2011 order not to engage in the sale of securities by the Canada’s financial markets authority (the “QAMF”), stemming from a prior securities violation. In addition, the SEC alleges that Lacroix and Paradis-Royer violated a June 2017 order by the QAMF, which found that PlexCoin was a “security” under the Howey Test and ordered for the two to cease engaging in the offering of PlexCoin.

PlexCoin raised about $15,000,000 in its ICO beginning on August 7, 2017 and ending on October 1, 2017. The SEC’s complaint alleges that the ICO was “nothing more than a fraudulent scam run primarily by Lacroix and his cohorts,” claiming that various statements made by PlexCoin in the offering white paper and various social media outlets were materially false, that PlexCoin obscured the fact that Lacroix was a repeat securities law violator, and that PlexCoin made promises of investment returns without a reasonable basis for doing so. Finally, the SEC alleges that the defendants misappropriated the funds raised in the ICO by failing to invest them as outlined in PlexCoin’s whitepaper and other public disclosures, and instead spent more than $200,000 on extravagant personal expenditures.

The SEC seeks a final judgement (i) ordering the defendants to disgorge “their ill-gotten gains,” (ii) permanently enjoining the defendants from engaging in the sale of unregistered securities, (iii) prohibiting the defendants from purchasing digital securities or serving as an officer or director of any public company, and (iv) various civil monetary penalties. Robert Cohen, Chief of the SEC’s Cyber Unit, noted in the announcement of this enforcement action that “[t]his first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing. We acted quickly to protect retail investors from this initial coin offering’s false promises.”

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