US SEC Charges Two Firms for Alleged Crypto Pump and Dump Scheme

The United States Securities and Exchange Commission (SEC) has accused two companies, their executives, and a supposed international gold trader, of running a fraudulent scheme to boost demand for their digital token.

The false promotion of the token netted proceeds of over $36 million for the defendants, the agency said.

A Fake $10 Billion Gold Bullion Acquisition

According to a lawsuit filed on Friday (September 30, 2022), a Bermudan company called Arbitrade, a Canadian firm Cryptobontix, Troy Hogg, founder and owner of Cryptobontix, James Goldberg, Stephen Braveman, COO of Arbitrade, and Max Barber, a so-called international gold trader ran an alleged pump and dump scheme involving a cryptocurrency called Dignity (DIG) from 2017 to 2019.

As stated in the SEC’s complaint, Hogg employed Russian developers in 2017 to create Dignity, an Ethereum-based token, which was owned and controlled by Hogg and Cryptobontix. The coin started “trading exclusively” on Livecoin, a Russian crypto trading platform.

Both Arbitrade and Cryptobontix claimed through announcements that the former 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.

The companies also claimed that they got an auditing firm to audit the gold as a way to boost investors’ confidence. However, the SEC alleged that both the gold purchase and the gold audit never happened, as they were tactics to get investors to buy the DIG tokens.

DIG Token Value Dropped to Zero

The SEC also claimed that Hog and Goldberg sold DIG on Livecoin at “artificially inflated prices,” resulting in total proceeds of $36.8 million. Interestingly, DIG was delisted from the Livecoin platform as of February 2020 after the token’s value plummeted to zero.

As stated in the lawsuit, investors participated in what they believed was an investment opportunity by committing their funds using bitcoin or any other crypto.

Consequently, the SEC is charging the defendants in the case 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 prejudgment interest, permanent injunctive relief, and civil monetary penalties.

In addition, the SEC is asking the court to issue an officer and director bar for all the individuals named in the lawsuit.