What has happened?

The U.S. Securities and Exchange Commission (SEC) has halted an alleged $30 million cryptocurrency Ponzi scheme targeting more than 300 investors in the U.S. and Canada.

What does this mean?

According to the SEC complaint, Jose Angel Aman operated a purported crypto business called Argyle Coin as a Ponzi scheme, using new investor funds to pay prior investors.

The complaint alleges that the fraud was a continuation of a scheme Aman orchestrated with two other of his companies, Natural Diamonds Investment Co. (Natural Diamonds) and Eagle Financial Diamond Group Inc.

The SEC said that he allegedly sold unregistered securities in the two companies since May 2014, "falsely promising" investors that the companies would invest in whole diamonds to cut down and sell for profit.

Harold Seigel and Jonathan H. Seigel, who also have interests in Natural Diamonds and Eagle, are also said to have helped Aman.

The SEC said:

"In October 2017, Aman and Jonathan H. Seigel continued the scheme by luring investors to invest in Argyle Coin, falsely claiming the investment was risk-free because it was backed by fancy colored diamonds, and promising to use investor funds to develop the cryptocurrency business."

However, according to the complaint, Aman and the three companies instead "misused or misappropriated" more than $10 million of investor funds to pay other investors their purported returns as well as for Aman's personal expenses, including rent on his home, buying horses, and riding lessons for his son.

Judge Robin L. Rosenberg of the U.S. District Court for the Southern District of Florida has granted the SEC’s request for a temporary restraining order and temporary asset freeze against Aman, Argyle Coin and other companies charged by the SEC as relief defendants.

Eric I. Bustillo, Director of the SEC’s Miami Regional Office, said:

"As alleged, Aman operated a complicated web of fraudulent companies in an effort to continually loot retail investors and perpetuate the Ponzi schemes as well as divert money to himself."

The complaint charges Natural Diamonds, Eagle, Argyle Coin, Aman, Harold Seigel and Jonathan H. Seigel with of the securities registration violations and also Natural Diamonds, Eagle, Argyle Coin and Aman breaching the antifraud provisions of the federal securities laws.

The SEC is seeking disgorgement of "allegedly ill-gotten gains" and and financial penalties.

Next steps

If you want to take advantage of blockchain's huge potential and disruptive impact, while keeping track of ever-developing regulatory and legal requirements, visit our Hogan Lovells Engage Blockchain Toolkit.

For more news and analysis that is tailored to you, as well as access to Hogan Lovells' cutting-edge interactive Lawtech tools, register for free on Engage.

You can also keep track of all the Engage content by following our LinkedIn page.