Crypto Exec Pleads Guilty in $21 Million ICO Fraud; Here’s What We Know

In the Central District of California, the CEO of Titanium Blockchain Infrastructure Services Inc. (TBIS) entered a guilty plea on July 22 for his part in a crypto fraud scheme involving TBIS’s initial coin offering (ICO).

The Department of Justice noted in a release that the ICO raised around $21 million from investors domestically and abroad.

CEO accepts charges

Citing court documents, the DoJ underlined that the CEO and founder of TBIS, Michael Alan Stollery, promoted the platform as a crypto investment opportunity and used several false and deceptive claims to convince investors to buy “BARs,” the cryptocurrency token or coin offered by TBIS’s ICO. However, Stollery failed to register the ICO with the SEC, despite being obliged to do so, with no valid exemption from the registration requirements.

Notably, back in 2018, the U.S. Securities and Exchange Commission (SEC) obtained a court order to halt the ICO, calling it “an ongoing fraud.”

In an SEC complaint filed on May 22, 2018, Stollaire and Titanium were also accused of breaking the anti-fraud and registration provisions of the federal securities laws in the federal district court in Los Angeles. In addition, EHI Internetwork and Systems Management Inc., a different Stollaire company, was also accused of breaking the antifraud laws in the case.

In the recent verdict, Stollery admitted that he falsified parts of TBIS’s white papers to entice investors. Stollery also planted phony client testimonials on TBIS’s website and falsely claimed to have business relationships with the Federal Reserve and dozens of prominent companies, including PayPal, Verizon, Boeing, and The Walt Disney Company, to give the impression of legitimacy.

Stollery also admitted that he did not use the invested funds as promised, but instead mixed them with his personal funds, to use the proceeds for expenses unrelated to TBIS, the DoJ stated.

While Stollery pleaded guilty to one count of securities fraud, as per the release, he will be sentenced on Nov. 18 and could face up to 20 years in prison.

ICO rules get stricter

Interestingly, the DoJ has been quite prompt with crypto fraud cases and announced criminal charges against six defendants in four separate cases over a course of three days in the last month, the Financial Times reported.

Meanwhile, Be[In]Crypto also cited reports last month that the U.S. securities regulator is reportedly investigating whether Binance violated securities laws with its ICO in 2017.

That said, several regulators globally are also tightening rules around ICO.

The Thailand SEC proposed stricter regulations on ICOs that would require a portal to file for approval with the regulator for the issuance and listing of such tokens in both primary and secondary markets, the Bangkok Post reported last month.