SEC Alleges Two Companies With The Crypto Pump-And-Dump Scheme

The Securities and Exchange Commission (SEC) of the United States accused two companies, Cryptobontics of Canada and Arbitrade Ltd. of Bermuda, of operating a pump-and-dump scheme involving an Etherium-based crypto asset known as “Dignity” or “DIG,” according to the press release published by SEC on Friday.

Related: https://cryptoonus.com/sec-files-lawsuit-against-crypto-influencer/

Along with these companies, their administrators, including Troy R. J. Hogg, James L. Goldberg, Stephen L. Braverman, and a purported international gold broker named Max W. Barber, were also accused of participating in this alleged scheme.

A pump and dump-scheme is a form of securities fraud, also called stock fraud. Fraudsters often spread fake or misleading information to lure investors into their stocks. It “pumps up” the stock price and then “dumps” the stock’s shares by selling. When scam operators “dump” (sell) all their overpriced shares and stop hyping, stock prices usually go down, losing investors’ money.

The SEC claims that between May 2018 and January 2019, these companies spread false news that Arbitrade Limited had acquired title to 395,000 kgs of gold bullion with a worth of over $10 billion, the complaint states. In addition, the company deliberately reissued each DIG token and offered investors $1 worth of this gold.

Moreover, the SEC also asserts that the gold acquisition transaction was done to boost demand for DIG. This strategy permitted the firm’s principals to sell at least $36.8 million of DIG, including American traders, at inflated prices.

The SEC alleged violations of federal anti-fraud and securities registration laws. The objection demands a permanent injunction against all defendants, prejudgment interest along with compensatory and civil penalties. It also seeks executive officer and director injunctions against certain defendants.

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