US Entrepreneur Charged with Defrauding Investors in $42 Million Cryptocurrency ICO
An American entrepreneur, Eran Eyal, has recently been charged with defrauding investors in a cryptocurrency Initial Coin Offering (ICO) that raised over $42 million. The Securities and Exchange Commission (SEC) has alleged that Eyal, the founder of UnitedData, conducted a “fraudulent unregistered securities offering” by selling tokens for his Shopin business from August 2017 to April 2018.
Allegations Against Eyal
The SEC claims that Eyal misappropriated at least $500,000 of investor funds for personal expenses such as rent, shopping, entertainment, and even a dating service. The funds were intended for Shopin, a platform that aimed to create universal shopper profiles on the blockchain to track customer purchase histories across online retailers and provide personalized product recommendations.
However, according to the SEC complaint, Shopin never developed a functional platform as promised. Eyal and Shopin allegedly deceived investors by providing false information about partnerships with well-known retailers and the involvement of a prominent entrepreneur in the digital asset space.
Legal Actions
The SEC complaint, filed in a federal district court in Manhattan, charges Eyal and Shopin with violating anti-fraud and registration securities laws. The SEC seeks permanent injunctions, civil penalties, and a prohibition on Eyal and Shopin from participating in future digital asset securities offerings.
Similar Cases
This case comes in the wake of three individuals being charged for their involvement in a cryptocurrency Ponzi scheme that defrauded investors of $722 million. The BitClub Network, a cryptocurrency mining operation that operated from 2014 to 2018 without turning a profit, led to charges from both the SEC and criminal authorities.
The issue of cryptocurrency fraud has become so widespread that social media platforms like Twitter have taken measures to ban all advertisements related to ICOs and token sales to protect investors from potential scams.
As regulatory authorities continue to crack down on fraudulent activities in the cryptocurrency space, investors are urged to exercise caution and conduct thorough due diligence before participating in any token sales or investment opportunities.