The US Securities and Exchange Commission accused the cryptocurrency companies Arbitrade and Cryptobontix of fraud and organizing a “pump and dump” scheme using the Dignity (DIG) cryptocurrency.
The agency filed charges against the founders of the Bermudian company Arbitrade and the Canadian project Cryptobontix Troy Hogg, James Goldberg, Stephen Braveman, and gold trader Max Barber. Between 2017 and 2019, suspects provided investors with false data about the DIG token, the regulator assures. Thus, the defendants artificially increased the demand for the crypto asset, encouraging investors to invest even more money in it.
The SEC complaint states that in 2017, Hogg recruited Russian developers to create DIG, an Ethereum-based token that was controlled by Cryptobontix. The token was traded on exclusive terms on the Russian-language trading platform Livecoin. Arbitrade claimed that through Barber’s company, SION Trading FZE (SION), it acquired $10 billion worth of gold bars that were intended as collateral for the tokens. Each of the three billion DIGs was backed by $1 in gold.
Defendants also provided false information about undergoing a gold audit, which was allegedly performed by an independent accounting company. However, the SEC claims that in reality there were no transactions to buy gold, much less an audit. This was just a deliberate tactic to boost investor confidence and encourage them to buy DIG.
The SEC alleges that Hogg and Goldberg sold these crypto assets on Livecoin at an artificially high rate, as a result of which they managed to raise about $36.8 million. However, the value of the token later fell to zero, and in February 2020 it was delisted from Livecoin. In addition to fraud, the Commission also accuses the defendants of violating securities laws because the ICO was not registered with the regulators. The SEC requires the return of funds illegally obtained from investors, as well as the payment of an administrative fine and interest for the period before the judgment is issued. In addition, the Commission demanded that the court forbid the defendants in the lawsuit from creating such organizations.
Recall that the SEC recently accused Friedman LLP, a former auditor of Tether, of providing incorrect information about the audit and hiding the risks of fraud.
Source: Bits

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