As much as people love ICOs for offering an alternative fundraising method to startups, they’ve also offered an equally enticing new way for some scammers to take advantage of would-be investors who want to get into a new market.
Cracking down on such scams, the U.S. Securities and Exchange Commission has filed charges against the two people behind the PlexCoin ICO and the entity in charge of it for misleading investors and engaging in other illegal activities.
A look back at how the site looked in July shows us that the ICO had an FAQ section which included the claim that returns would reach 1,354% in the period stated in the SEC’s filing.
That claim, along with most of the questions in the FAQ, has since disappeared.
Another part of the site that existed in July but has since disappeared was a slider that showed would-be investors what their “return” would be for the investment they planned to make.
It’s likely that PlexCoin wanted to sweep these claims under the rug, making it less conspicuous that they were promoting themselves in this manner.
However, as we get further down the report, we can see that PlexCoin has made a habit of making these larger-than-life claims.
“In connection with the PlexCoin ICO, PlexCorps and Lacroix made the following false and misleading statements, among others, for which Lacroix was responsible: (a) that the PlexCorps' "team" consisted of a growing cadre of experts stationed around the world and with a principal place of business in Singapore; (b) that the identity of PlexCorps' executives had to be kept hidden to avoid poaching by competitors and for privacy concerns; (c) that the proceeds of the PlexCoin ICO would be used to develop other PlexCorps products; and (d) that investors could expect "enormous" and "real" returns on PlexCoin Token investments,” the SEC filing read.
We later find that the two people that make up PlexCorp are a 26-year-old woman and 35-year-old man living in Quebec, not a company with a team of “experts” based off of Singapore.
They have already been hit with an injunction from their local court—The Quebec Tribunal—but have defied the order by continuing to market their tokens, shutting down their Canadian website (but not the U.S. one), and posting more advertisements on social media.
PlexCoin’s website also once featured a whitepaper that is no longer available at the time this is written.
The SEC said that their whitepaper contained more promotional “get rich quick” material and that it “insisted that the identity of PlexCorps’ ‘executives’ would remain hidden to protect ‘our projects’ security’ and to avoid poaching by competitors.”
The Securities and Exchange Commission’s “cyber unit” was announced in late September this year to combat this kind of fraud and it seems like they’re already bagging a few scalps, but it might not necessarily be turbulent to the ICO market in the U.S. as a whole. After all, these were outright scammers looking to promote a Ponzi scheme that went terribly wrong.