What has happened?

The US Securities and Exchange Commission (SEC) has obtained an emergency court order stopping an initial coin offering (ICO) whose backers falsely claimed had been approved by the SEC.

What does this mean?

According to the SEC press release, BlockVest allegedly falsely claimed its ICO and its affiliates had received regulatory approval from the SEC and other agencies.

However, the SEC's complaint alleges that BlockVest and its founder, Reginald Buddy Ringgold III, "were using the SEC's seal without permission", which is a violation of federal law, and were also "falsely claiming their crypto fund was 'licensed and regulated'".

Ringgold is also said to have promoted the ICO with a fake agency he had created called the "Blockchain Exchange Commission", using a graphic similar to the SEC's seal and the address of the agency's headquarters.

"Blockvest and Ringgold also allegedly misrepresented Blockvest's connections to a well-known accounting firm, and continued their fraudulent conduct even after the National Futures Association (NFA) sent them a cease-and-desist letter to stop them from using the NFA's seal and from making false claims about their status with that organization," the SEC said.

The US District Court for the Southern District of California has frozen the defendants' assets and temporarily prohibited them from violating the antifraud provisions and securities registration provisions.

A hearing should take place on October 18 to determine whether the asset freeze should continue and a preliminary injunction be issued.

"We allege that this ICO is using both the SEC seal and a made-up crypto regulatory authority to trick investors into believing the ICO was approved by regulators," said Robert A. Cohen, Chief of the SEC Enforcement Division's Cyber Unit.

"The SEC does not endorse investment products and investors should be highly skeptical of any claims suggesting otherwise," he added.

A "pump-and-dump scheme"

This is the second enforcement action by the agency in the past few days.

Earlier this week, the SEC asked a district court to enforce a subpoena against Saint James Holding and Investment Company Trust and its trustee, Jeffe James, as part of a probe into a potential $100 million "pump-and-dump scheme".

The SEC statement said:

"The SEC is investigating whether certain individuals or entities engaged in a potential "pump-and-dump" scheme in the stock of Cherubim Interests, Inc., among other penny-stock companies."

In February, the SEC suspended trading in the securities of Cherubin for 10 business days because of concerns in respect of the accuracy of disclosures.

"Based on its ongoing, nonpublic investigation, the SEC has reason to believe that to 'pump' its stock price, Cherubim issued false public statements in January 2018 claiming that the company had executed a $100,000,000 financing commitment to launch an initial coin offering ('ICO') for St. James Trust. After Cherubim's stock price and trading volume increased on this news, certain individuals associated with the company may have 'dumped' their overvalued Cherubim stock for significant profits."

The SEC said that, to date, the defendants have yet to respond to its subpoenas, even though copies were served "personally" on James.

"The SEC's application seeks an order from the court compelling James and St. James Trust to produce all responsive documents. The SEC is continuing its fact-finding investigation in this matter and, to date, has not concluded that anyone has violated the securities laws."

Next steps

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