The Securities and Exchange Commission(SEC) is beginning to crack the whip on ICOs as it has threatened to do all year long. Following Tezos last week, it’s PlexCoin’s turn to face the music.
On December 4, the agency obtained an emergency court order to freeze the assets of PlexCorps founders, Dominic Lacroix and Sabrina Paradis-Royer, charging them with defrauding investors with an initial coin offering (ICO) for PlexCoin. As per court order, PlexCoin ICO has thus been halted.
PlexCoin was announced in July, 2017 as the next decentralized global cryptocurrency with faster transactions and increased storage efficiency. The ICO was launched without any technical information concerning the currency's implementation or functionality or even a white paper. The project reeked of duplicity from the get-go. However, it had managed to raise $15 million from thousands of investors since August.
According to SEC, Lacroix, and his company, PlexCorps, had launched the PlexCoin ICO and falsely promised a 13-fold profit in less than a month. Last Friday, the PlexCorps' Facebook page addressed its “dear members”, boasting success and thanking them for a near 700% gain in 24 hours.
The PlexCoin ICO had previously been held in contempt of court in Quebec back in July, 2017 as the provincial regulators had pursued the alleged fraud. The SEC acknowledged the assistance of Quebec’s Autorité Des Marchés Financiers. The Canadian province’s orders prohibited him and his partners from disposing of any funds, securities, or other property in connection with their activities relating to the sale of PlexCoin tokens.
Lacroix is seen to be a recidivist by the SEC when it comes to scamming. In February 2013, Lacroix and his then company Micro-Prêts pleaded guilty before the Court of Quebec to six charges of illegal distribution, illegal practice and misrepresentations. Lacroix was then hit with a $25,000 fine by a Canadian court.
The SEC’s complaint charges Lacroix, Paradis-Royer and PlexCorps with violating the anti-fraud provisions, and Lacroix and PlexCorps with violating the registration provision, of the U.S. federal securities laws. The complaint seeks permanent injunctions, disgorgement plus interest and penalties. For Lacroix, the SEC also seeks an officer-and-director bar and a bar from offering digital securities against Lacroix and Paradis-Royer.
First Of Many?
The SEC said Monday’s charges are the first to be filed by its new cyber unit, which was created in September to focus the division's cyber-related expertise on misconduct involving distributed ledger technology and initial coin offerings, the spread of false information through electronic and social media, hacking and threats to trading platforms.
“This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing,” said Robert Cohen, Chief of the Cyber Unit. “We acted quickly to protect retail investors from this ICO’s false promises.”
When requested to comment on the matter, PlexCorps declined stating that the matter was sub judice.
A Word To The Wise
In the words of P.T. Barnum, “There's a sucker born every minute.”
That a blatant ponzi scheme in the name of an ICO without a whitepaper, any technical information, believable proposition or even so much as a roadmap is able to swindle thousands of investors out of their pocket is a gravely worrying reflection on the naiveté of crypto investors.
The PlexCoin scam is just yet another cautionary tale, reminding investors to conduct their due research before participating in ICOs.