The US Securities and Exchange Commission (SEC) has charged Kristijan Krstic, John DeMarr and Robin Enos with digital asset fraud.
Krstic is the founder of Start Options and Bitxoiin2Gen; while DeMarr was the primary promoter for both companies in the US, and Enos worked with DeMarr on the marketing material.
According to the regulator, the trio defrauded retail investors out of more than $11m (£8m, €9m).
The SEC alleges that between December 2017 and May 2018 they “fraudulently induced investors to buy digital asset securities”.
In addition, the complaint said that they falsely claimed Start Options was “the largest Bitcoin exchanged in euro volume and liquidity” and that it was “consistently rated the best and most secure Bitcoin exchange by independent news media”.
Subsequently, the SEC alleges that from January 2018 both Krstic and DeMarr started promoting Bitcoiin2Gen’s unregistered initial coin offering (ICO) of digital securities, known as B2G tokens.
Enos was the one who drafted promotional material to be distributed to potential investors, the regulator states.
Misleading material
The watchdog added: “These materials allegedly contained numerous false statements, including that the B2G tokens would be deliverable on the Ethereum blockchain, that the invested funds would be used to develop a coin that was ‘mineable’, and that the tokens would be tradeable on a proprietary digital asset trading platform at the platform’s ‘launch’ in early April 2018.”
But the SEC’s complaint alleges that such claims were false, that Bitcoiin2Gen “was a sham” and that Krstic and DeMarr misappropriated millions of dollars in investor funds “for their own personal benefit”.
“The conduct alleged in this action was a blatant attempt to victimise those interested in digital asset technology and these defendants should be held accountable,” said Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit.
“In reality, we allege, these ventures were fraudulent enterprises aimed simply at misappropriating funds from investors.”
Krstic and DeMarr have now been charged with violating the antifraud and registration provision of the federal securities laws, and Enos with aiding and abetting the antifraud violations.
The SEC’s complaint seeks injunctive relief, disgorgement plus interest, penalties, and an “officer-and-director bar” against Krstic and DeMarr.
