US SEC Cracks Down on Fraudulent Crypto Hawking in Texas
An ICO project that marketed its assets directly to the public, is taken to court by the US Securities and Exchange Commission.
The boom of crypto assets spawned a secondary industry of scams. Based on the success of ICOs targeted to crypto enthusiasts, scammers started targeting naive investors directly. Through the Bitqyck, Inc., more than 13,000 investors were affected, before the US Securities and Exchange Commission took over and launched a court case against the scammers.
According to the complaints filed by the SEC, the firm raised more than $13 million by selling the Bitqy and BitqyM assets, which were simultaneously unregistered securities.
The US SEC started investigating the Bitqyck project back in the summer of 2018, but ended up filing a lawsuit a year later with the U.S. District Court for the Northern District of Texas.
“Because digital investment assets represent a new and exciting technology, they can be very alluring, especially if investors believe they are getting in on the ground floor and will own part of the operations,” said David Peavler, Director of the SEC’s Fort Worth Regional Office. “We allege that the defendants took advantage of investors’ appetite for these investments and fraudulently raised millions of dollars by lying about their business.”
A year ago, the unregistered ICO received a cease and desist order. The related assets are not publicly traded and it is unknown if any actual coins were distributed to the public.
The platform was the brainchild of Mark Royer, also founder of My Crypto Miner. Royer relied on referrals, thus building a pyramid scheme, during a time when actual mining was highly competitive.
The US SEC handles hundreds of ICO cases, with a thorough process that ends up fining the projects even years after their initial launch. While some of the ICOs are well-known in the crypto space, Royer’s project followed a different pattern.
The Bitqyck project targeted retirees, offering an investment that could reportedly quickly build a nest egg. This approach is well-known to the US SEC, as in the past years, firms would print detailed prospectuses, to target naive investors with the promise of high-return penny stocks. Now, with the rise of crypto assets, scammers switched from penny stocks to digital tokens.