SEC Cryptocurrency Fraud Investigations
Experienced Cryptocurrency Fraud Defense Team
Are you being investigated by the SEC for crypto fraud? If so, now is the time to hire an experienced crypto defense attorney.
The government has been developing strict rules that focus on strengthening cryptocurrency fraud investigations. Agencies such as the Securities and Exchange Commission (“SEC”) are especially notable for increasing their investigative efforts into companies that rely on cryptocurrencies as well as individuals who transact with cryptos.
At Oberheiden, P.C., our attorneys and consultants are highly experienced in the legal landscape and policy debates regarding cryptocurrencies. We are able to handle complex crypto fraud investigations and defend you and your company from unsubstantiated claims of crypto fraud.
Our attorneys include former FBI agents, former U.S. attorneys, and former prosecutors—all of which work together to give you the best and most personalized defense strategy.
Do not wait for a federal investigation to turn into a protracted litigation. A federal investigation and litigation can be a very worrisome time and can lead to substantial fines and penalties, disgorgement orders, and injunctions.
Get in contact with us today. Put Oberheiden, P.C. on your side today to fight for your business and reputation.
What are Cryptocurrencies?
Cryptocurrencies are digital assets used as a means of value transfer such as buying and selling goods or as an investment. Cryptocurrencies use encryption and are therefore anonymous.
The increased sophistication of the Internet has made possible the proliferation of hundreds of cryptocurrencies and crypto investing and the mining of coins.
The most common cryptocurrency is Bitcoin, though other prominent coins include Litecoin, Ethereum, Bitcoin Cash, XRP, Dogecoin, and Stellar, as some examples.
Many businesses are already accepting cryptos as a means of payment due to their security, adaptability, simplicity and speed in finalizing transactions, and anonymity.
However, Congress has not adopted a consistent piece of legislation purporting to regulate the transfer and trade of cryptocurrencies—this is both an obstacle to mass adoption and a reason for the SEC to scrutinize their use.
As cryptos develop as a popular medium of exchange and value, the risk of fraud also increases. Companies and individuals relying on cryptocurrencies need to be especially wary of increased federal government efforts to investigate suspected fraudulent uses of cryptocurrencies.
The Rise in Cryptocurrency Fraud
Crypto fraud refers to the deceptive or fraudulent practice of using cryptocurrencies to induce another into transferring their crypto or the practice of stealing another’s access to crypto assets and transferring their funds to the fraudsters.
The use of cryptocurrencies as a means of value exchange carries several negative connotations—mainly the use of cryptos to fund illegal activities on the Dark web.
Fraudsters are aware that crypto transactions are more secure, transparent, and very hard to trace. While difficult, it is also possible to hack the code and steal digital assets from individuals—either without their knowledge or by fraudulent inducing investors to send them cryptocurrencies.
It is also much easier for fraudsters to reap incredible financial profit via crypto transfers as opposed to laundering mounds of cash.
Over the years, fraudsters have devised elaborate and comprehensive investing plans that entice investors to give the fraudsters their money. The fraudsters can easily use cryptocurrencies to disguise their transactions as legal and legitimate.
And because these transactions are anonymous, federal agencies often have a very hard time finding the source of the transaction, the parties involved, and the motives for carrying on such an elaborate fraudulent scheme.
Therefore, their adoption and use by individuals and businesses are heavily scrutinized by federal authorities such as the SEC for violations of the securities laws.
The SEC has made its intent clear that anyone who perpetrates crypto fraud will be investigated—whether the matter involves ICOs, unregulated online exchanges, unregistered securities, illegitimate websites, investor scams, etc.
Examples of Crypto Fraud
Crypto fraud can be perpetrated in many ways. It typically involves the use of cryptocurrencies to carry out a fraudulent scheme to induce investors to transfer their cryptocurrencies.
More specific examples include the following:
- Buying and selling illegal goods and services in exchange for transferring cryptocurrencies.
- Crypto laundering—engaging in illegal trading of cryptos and disguising those transactions to make them appear legally obtained.
- Converting illegally obtained cryptocurrencies into traditional fiat currencies.
- Layering crypto transactions by transferring smaller funds to multiple legitimate wallets.
- Using illegally obtained cryptos to buy or sell other assets.
In other words, crypto fraud is a very broad term that encompasses any transfer, conversion, or deposit of illegal cryptos.
What You Need to Know About Initial Coin Offerings (“ICOs”)
An Initial coin offering (“ICO”) is the process where a company seeking to raise capital for a new coin launches an offering to the public—like an IPO—in order to raise funds. This would then require the company to register with the SEC (or satisfy an appropriate exemption) and to comply with various reporting and disclosure requirements.
The SEC has noted that these ICOs are increasing used to raise capital and are efficient means of conducting financial transactions; however, they also involve a high risk for fraud and manipulation.
The main reason for this high risk is because the markets for these coins are less regulated than the typical security markets for traditional capital trading.
If you are preparing to conduct an ICO or need help with a government investigation that concerns an ICO, do not hesitate to give our crypto defense team a call today.
Recent SEC Investigations for Crypto Fraud
SEC investigations for crypto fraud are on the rise. Below are recent examples of investigations initiated by the SEC involving cryptocurrencies, blockchain technology, and suspected violations of the federal securities laws:
- February 1, 2021: The SEC charged three individuals with an elaborate fraud scheme that defrauded retail investors of over $11 million from unregistered digital asset securities offerings. The SEC alleged that the defendants had fraudulently induced investors to buy digital asset securities through their false assertions that their digital asset mining and trading platform was the best and very secure.
- May 28, 2021: The SEC filed an action against five individuals for promoting a global unregistered digital securities offering which raised a total of over $2 billion from retail investors. The promoters, according to the SEC, had allegedly offered and sold the securities without registering with the Commission and without being registered as broker-dealers.
- December 22, 2020: The SEC filed an action against Ripple Labs, LLC and two of its executives claiming that they raised over $1.3 billion via an unregistered digital securities offering. Ripple allegedly raised these funds by selling the digital asset, XRP, to investors domestically and abroad in an unregistered offering.
- September 11, 2020: The SEC charged five individuals, including film producer Ryan Felton and rapper T.I., and three others for promoting Felton’s two unregistered and fraudulent initial coin offerings. The SEC alleged that Felton had promised to build a digital streaming platform and digital-asset trading platform but instead misappropriated the funds that were raised from the ICO. Felton was also alleged to have secretly transferred tokens to himself and sold them into market, which allowed him to gain an additional $2.2 million in profits. The SEC further claimed that he engaged in manipulative trading to inflate the price of the tokens.
Need Advice with Crypto Fraud Investigations?
Crypto fraud investigations will continue to increase in the upcoming years especially as Congress aims to enact comprehensive legislation on the topic.
If you suspect a federal investigation or have received a subpoena from the SEC involving your crypto business or crypto transactions, do not wait to retain an experienced attorney.
Charges of crypto fraud can wreak havoc on your business relationships and reputation not to mention the significant fines and penalties, injunctions, and disgorgement orders that are possible.
The defense attorneys at Oberheiden, P.C. are experienced in navigating complex crypto transactions and allegations of crypto fraud in government investigations.
We are prepared to help you, prepare your individualized defense strategy, and negotiate with the SEC on your behalf.
Call or contact our office online today for a free consultation to protect your business and your reputation.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.