- SEC alleges that the defendants raised $4.3 million by offering and selling securities to four investors using “false and misleading statements.”
- The crypto advisory firms facing the lawsuit are Creative Advancement LLC and Edelman Blockchain Advisors, and their owner is Gabriel Edelman.
- SEC alleges the defendants only invested a small portion of investor funds in digital assets
The U.S. Securities and Exchange Commission (SEC) has sued two crypto advisory firms and their owner for their alleged involvement in misappropriating investors’ funds that they had pledged to invest in digital assets. The charges were filed in the federal district court in Manhattan.
The crypto advisory firms facing the lawsuit are Creative Advancement LLC and Edelman Blockchain Advisors, and their owner is Gabriel Edelman.
The main accusation is that the defendants raised $4.3 million by offering and selling securities to four investors using “false and misleading statements” between February 2017 and May 2021.
As per the allegations, the defendants had promised to help these investors invest in digital assets but proceeded to invest only a small portion of the funds. As per the complaint, Edelman used the investor funds to bankroll his personal expenses.
SEC accuses Edelman of engaging in “Ponzi-like” activities by sending some investors early repayments to lure them into making larger investments in the scheme.
SEC states Edelman targeted investors with very little knowledge about crypto with his scheme.
The financial watchdog is now working on seeking court orders to halt the firms’ operations and force the businesses to relinquish the profits they made off the alleged fraudulent transactions.
In recent days, SEC has increased its regulatory scrutiny of the digital asset space.
A few days back, SEC sued a Chicago-based crypto investments company and three employees for allegedly selling approximately $1.5 million in crypto that wasn’t registered with the investments regulator.
Earlier this week, SEC Chair Gary Gensler reinstated that “the vast majority” of cryptocurrencies are securities and therefore subject to his regulatory oversight.
Gensler had also stated that proof-of-stake (PoS) blockchains, which generate new coins for inventors who pool their holdings, take on investment contract-like attributes that could bring them under his agency’s purview.
In July, SEC used its first insider-trading case to formally declare nine digital tokens as “securities“ in its ongoing practice of defining its crypto watchdog status through enforcement actions.
As part of going after bad actors in the crypto space, SEC in May had expanded its Crypto Assets and Cyber Unit (formerly known as the Cyber Unit) in the Division of Enforcement to 50 dedicated positions.