The CEO of Titanium Blockchain Infrastructure Services (TBIS), a California-based firm, has received a four-year prison sentence. The court ruling brings to a close the 2018 initial coin offering saga, where investors lost over $21 million.
According to the Department of Justice, Michael Stollery, the founder of Titanium Blockchain, played a crucial role in a “cryptocurrency Ponzi scheme” that included an ICO for TBIS between 2017 and 2018.
SEC Accuse Stollery Of Selling Unregistered ICO
According to the Department of Justice, investors procured BARs, a crypto token, to engage in the ICO, which yielded around $21 million from domestic and international sources. Nonetheless, in 2018, Stollery faced allegations from the United States Securities and Exchange Commission, including failing to register the ICO with the regulatory body.
Last July, the executive confessed to a charge of securities fraud about the “fraud scheme.” His admission included falsifying various sections within TBIS’ whitepapers, inserting fabricated client testimonials onto the TBIS website, and disseminating untrue statements regarding business associations with the US Federal Reserve.
As a result, the company capitalized on the false ties with the US Fed to gain credibility and entice potential investors to invest. According to the SEC, he confessed to blending the funds of ICO investors with his finances and allocating a portion to cover unrelated expenditures like bills for his condominium in Hawaii and credit cards.
Despite the possibility of a 20-year prison sentence, the court has sentenced the CEO to over four years in jail for his role.
US SEC Intensifies Enforcement Action Against Crypto Firms
The SEC has recently intensified its efforts to pursue regulatory actions against the cryptocurrency industry. According to Cornerstone Research, the number of litigations related to cryptocurrency that the SEC filed increased in 2022.
The regulator initiated 30 enforcement actions against crypto market participants, representing a 50% surge from the 20 actions it took in 2021. Out of the 30 enforcement actions taken in 2022, 14 were related to ICOs, with over 50% of them involving allegations of fraud.
As a result, lawmakers have taken steps to regulate ICO offerings from crypto platforms. Meanwhile, Abe Chernin, the VP of Cornerstone Research and co-head of its FinTech practice, stated that the SEC persists in pursuing legal actions that claim tokens issued in unregistered securities offerings related to ICOs were investment contracts.
The US financial regulator based its argument on applying the Supreme Court’s Howey test. “Under the leadership of Gensler, the SEC has witnessed a surge in external agencies and organizations offering assistance during investigations concerning cryptocurrency.,” he added.
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