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The United States Securities and Exchange Commission has filed an emergency lawsuit in a Brooklyn federal court in an attempt to prevent a somewhat popular ICO from spending the money that was raised from the issuance of its cryptocurrency.
News of this emergency filing instantly led to a massive dump for Veritaseum, which raised a total of nearly $15 million from an Initial Coin Offering in mid-2017 and early-2018, and this emergency lawsuit may be emblematic of an imminent crackdown on unregistered securities that were offered through the course of the 2017 and 2018 ICO craze.
SEC Targets ICO That Attempted to Flout Registration Requirements for Cryptocurrency Offering
The emergency lawsuit, which was filed on August 12, claims that cryptocurrency company Veriaseum and founder Reginald Middleton fraudulently raised $14.8 million USD while attempting to flout regulatory requirements by characterizing the cryptocurrency (VERI) as things like gift cards and software.
Furthermore, the filing also notes that the defendants knowingly mislead investors about the business venture and offered investors fictitious data about the company’s revenue.
“Defendants knowingly misled investors about their prior business venture and the use of offering proceeds; touted outsized—but fictitious—investor demand for VERI; and claimed to have a product ready to generate millions of dollars of revenue, when no such product existed”
The complaint notes that of the $14.8 million that was raised throughout mid-2017 and early-2018, only $8 million is left.
Furthermore, the SEC also claims that the founders engaged in manipulation of the VERI cryptocurrency in an effort to make its price action look more appealing to investors.
“[The Defendants] placed a series of manipulative trades in VERI Tokens to increase their price and to induce investors to buy more tokens,” the filing notes
VERI Token Price Plummets 60%
At the time of writing, Veritaseum is trading down over 60% at its current price of $6.54, which marks a steep pullback from its year-to-date highs of $23.
Additionally, this pullback is also an extension of the massive drop that the VERI token has seen since setting its all-time-highs of nearly $500 in January of 2018 when the aggregated crypto markets reached a peak before the massive drop commenced.
Importantly, this SEC lawsuit is likely the first of many, and it is highly probable that the agency will begin targeting more ICOs that raised a significant amount of funding during the last bull run in the near-future.
Featured image from Shutterstock.
