The US Securities and Exchange Commission (SEC) announced on Thursday that it charged a man for defrauding more than $7 million from hundreds of investors through two separate fraudulent digital asset securities offerings.
According to a civil complaint filed against Ivars Auzins in the US District Court for The Eastern District Of New York, the SEC alleged that the defendant was the person behind the unregistered offer and sales of digital asset securities in an Initial Coin Offerings (ICO) and a purported digital asset cloud mining service program.
The regulator claimed that Auzins, a citizen of Latvia, allegedly used fake names, fraudulent profiles, and fictitious entities in carrying out the frauds against US and foreign investors and misappropriated almost all of the funds that the investors raised.
The SEC filing alleged that from January 2018 through March 2018, Auzins engaged in fraudulent offerings and sales of unregistered digital tokens as part of an ICO of Denaria, a purported multi-currency debit card platform.
He falsely told investors that Denaria allowed users to store their digital assets in a secure digital wallet and then spend them just like any other debit card, which could be offered by any credit card company. The SEC stated that the services and products were fictitious and Auzins ran away with the ICO proceeds.
The SEC’s complaint mentioned the second scam, which occurred between April 2019 to July 2019 in which Auzins fraudulently offered unregistered securities of a cloud mining program called “Innovamine.”
The agency alleged that Auzins falsely told investors that they could contribute digital assets to the cloud mining service, and then the company “Innovamine” would perform mining activities and provide investors with a daily automatic payout, whichever coin they mine.
The complaint revealed that such promises were false and that Auzins misappropriated almost all of the funds raised in the offering. While at least 25 US investors participated in Denaria’s ICO offering, more than 6 investors based in the US invested in Innovamine cloud mining service.
The SEC’s complaint therefore charges Auzins with violation of the antifraud and registration provision of the federal securities laws, and also seeks to seek permanent injunctions, including disgorgements, conduct-based injunctions, as well as civils penalties, prejudgment interest, and an officer- and director bar against him.
Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, talked about the development and said: “As we allege, Auzins was engaged in a brazen scheme to defraud retail investors under the guise of profitable digital asset opportunities. We will continue to detect and pursue those that seek to victimize investors in the digital asset space.”
Scams are running rampant in the crypto markets as a huge rally in Bitcoin, the flagship cryptocurrency, appeals to investors.
From October to March, Bitcoin price has surged 450% to nearly $59,000, while rival coins like Ethereum and dogecoin also witnessed impressive uptick.
However, a lack of regulation and the anonymity of digital assets have created a ripe environment for fraudsters.
During the fourth quarter of 2020, consumers lost nearly $82 million in cryptocurrency scams and in the first quarter of 2021, more than ten times of the amount were lost just from the same six-month period like the previous year.
While consumer interest in crypto assets such as Bitcoin has significantly risen, scammers have become more active in this area.
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