US SEC's cyber unit files charges in alleged ICO fraud

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The US Securities and Exchange Commission (SEC) said on Monday that its newly-created cyber unit had filed its first charges against an “initial coin offering” (ICO), alleging that a privately-held company called PlexCorps and its top two officials had defrauded investors.

The SEC said in a statement that it had obtained an emergency order to halt the PlexCorps ICO, which had raised up to 15 million US dollars from thousands of investors since August by falsely promising a 13-fold profit in less than a month.

The explosive growth of ICOs, a capital-raising tool that uses bitcoin and other cryptocurrencies to fund projects that leverage technologies such as blockchain, has sparked concern among regulators who say such schemes lack transparency.

Earlier this year, China's finance regulators banned projects raising cash through bitcoin or other virtual currency, and suspended operations on bitcoin trading platforms.

The cryptocurrency market is watching closely to see how regulators respond to ICOs, which SEC Chairman Jay Clayton has said closely resemble new company initial public offerings – implying they should be regulated just as tightly.

The charges are the first filed by the SEC’s new cyber unit, created in September to focus on misconduct involving distributed ledger technology, ICOs, the spread of false information through electronic and social media and hacking.

The decision to file charges comes just as the UK pushes to increase regulation of Bitcoin and other digital currencies by expanding the reach of European Union (EU) anti-money-laundering rules.

PlexCorps did not immediately respond to an emailed request for comment.

The Bitcoin Embassy in Tel Aviv./ Reuters Photo.

Source(s): Reuters