SEC Charges Three Individuals in Digital Asset Frauds

On February 1st, 2021 the Securities and Exchange Commission (“SEC”) charged three individuals with defrauding hundreds of retail investors out of more than $11 million dollars through fraudulent and unregistered digital asset securities offerings. According to the SEC’s complaint filed in U.S District Court for the Eastern District of New York, from December 2017 through May 2018 Kristijan Krstic and John DeMarr falsely claimed Start Options was “the largest Bitcoin exchange in euro volume and liquidity.” They both also claimed that it was “consistently rated the best and most secure Bitcoin exchange by independent news media.” Krstic is the founder of Bitcoiin2Gen (“B2G”) and Start Options while DeMarr was the primary U.S-based promoter for both companies. The SEC also alleges that Kristic and DeMarr promoted B2G’s unregistered initial coin offering (“ICO”). The third individual, Robin Enos, worked with DeMarr on the marketing material. He was alleged to have drafted fraudulent promotional materials that he knew would be misleading to the public. The materials allegedly contained many false statements. Krstic and DeMarr have been charged with violating the antifraud and registration provision of the federal securities laws, and Enos with aiding and abetting the antifraud violations. The alleged conduct, according to the SEC, was “a blatant attempt to victimize those interested in digital asset technology…These ventures were fraudulent enterprises aimed simply at misappropriating funds from investors.”

This is not the first time B2G has been involved in an SEC matter. In February 2020, the SEC settled charges against actor Steven Seagal “for failing to disclose payments he received for promoting an investment in an initial coin offering (ICO) conducted by Bitcoiin2Gen (B2G).” The SEC found that Seagal was promised $250,000 in cash and $750,000 in B2G tokens for posting on social media to encourage the public not to miss out on the B2G ICO. The SEC’s order found that Seagal failed to disclose his compensations made from promoting the ICO conducted by B2G and he was also found to have violated the anti-touting provisions of the federal securities laws. The agency also noted that under anti-touting provisions of federal securities laws, “any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion.” Seagal agreed to pay $157,000 in disgorgement and a $157,000 penalty.