Two companies, their executives, and a supposed international gold trader, have been accused by the United States Securities and Exchange Commission (SEC) of running a fraudulent scheme to increase the demand for their digital token.
This false promotion of the token generated proceeds of over $36 million for the defendants, the agency reported.
The lawsuit filed on Friday (September 30, 2022) revealed that, a Canadian firm Cryptobontix, a Bermudan company called Arbitrade, James Goldberg, Stephen Braveman, COO of Arbitrade, Troy Hogg, founder and owner of Cryptobontix, and Max Barber, a so-called international gold trader ran an alleged pump and dump scheme that involved a cryptocurrency called Dignity (DIG) from 2017 to 2019.
According to SEC’s complaint, Russian developers were employed by Hogg in 2017 to create Dignity, a token based on the Ethereum-blockchain, and it was owned and controlled by Cryptobontix and Hogg. The coin started “trading exclusively” on a Russian crypto trading platform called Livecoin.
Cryptobontix and Arbitrade both made claims through announcements that the latter purchased and received gold bullion worth $10 billion from SION, a company owned by Barber, with each of the three billion DIG tokens backed by $1 worth of gold.
They also claimed that they boosted the confidence of investors’ by getting an auditing firm to audit the gold. However, the SEC refuted that claim saying both the purchase of gold and the gold audit never happened, and were just tactics to get investors to buy the DIG tokens.
The SEC also claimed that DIG was sold on Livecoin at “artificially inflated prices,” by Hog and Goldberg which resulted in a total proceed of $36.8 million. However, it is interesting to note that as of February 2020, DIG was delisted from the Livecoin platform after the token’s value plummeted to zero.
As was stated in the lawsuit, investors participated because they believed it was an investment opportunity and committed their funds using bitcoin and other cryptocurrencies.
As a result of this, the defendants in the case have been charged with “violating the antifraud and securities registration provisions of the federal securities laws.” Furthermore, the regulator’s complaint is seeking the repayment of ill-gotten gains plus permanent injunctive relief, prejudgment interest, and civil monetary penalties.
In addition, the SEC has asked the court to issue an officer and director bar for all the individuals named in the lawsuit.
Featured Image Source: crysonar.com
