This article goes to show that promising unrealistic returns and misleading investors can have serious consequences. I wonder how authorities will approach ICO enforcement, because there are quite a few who have made false claims which have left investors out large sums of money. The longer they are complacent in pursuing the scammers, the more losses investors will suffer, and more harm will come to cryptocurrency's image in the public eye.
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SEC accuses British executive of bitcoin fraudhttps://www.ft.com/content/da4414f8-5ddd-11e7-9bc8-8055f264aa8bThe telephone sales brokers made Bitcoin Store sound like a great investment.
The digital currency platform had generated gross sales of $5.6m in the first quarter, they told US investors. The company’s chief executive, Gordon Phillips, had once been global head of currency and options trading at HSBC and its chief operating officer, Joseph Bilkhorn, had been Credit Suisse’s chief financial officer.
There was just one problem with the sales pitch: none of it was true.
The company was the creation of Renwick Haddow, a British citizen, who had been disqualified from serving as a company director in the United Kingdom and had been sued by regulators there for misleading investors, the Securities and Exchange Commission said on Friday.
The executives with the fancy financial pedigrees were also Mr Haddow’s creations; the men never existed, the SEC said, in a civil complaint accusing him of securities violations.
Bitcoin Store was just part of a sprawling fraud by Mr Haddow, 48, which included establishing InCrowd Equity Inc, an unregistered broker-dealer, according to the SEC. InCrowd peddled securities in Bitcoin Store and Bar Works, which sold leases for shared office space in renovated bars in New York and San Francisco, the SEC said. Investors in those leases were promised annual returns of at least 15 per cent.
“Haddow created two trendy companies and misled investors into believing that highly-qualified executives were leading them to quick profitability,” said Andrew Calamari, director of the SEC’s New York regional office. “In reality, Haddow controlled the companies from behind the scenes and they were far from profitable.”
Mr Haddow raised nearly $38m in the twin scams, the SEC said. He also faces criminal charges in Manhattan, where federal prosecutors have accused him of two counts of wire fraud. Each count carries a maximum 20-year prison sentence.
The SEC has obtained an emergency asset freeze against Mr Haddow and his companies. The commission is seeking a permanent injunction, repatriation of funds and the disgorgement of ill-gotten gains.
Mr Haddow, who has lived in New York since October 2014, funnelled at least $18m to accounts in 40 countries, including China, Cyprus, Mauritius and Morocco, prosecutors said.
One month after landing in New York, Mr Haddow established InCrowd, the unregistered broker-dealer, and staffed it with sales representatives who he found on Craigslist, according to prosecutors. One former employee witnessed brokers “badgering, harassing and shouting at prospective investors” on the telephone, according to a criminal complaint by FBI agent Melissa Beresford.
The sales representatives were paid $100 a day and earned commissions based on the total dollar value of securities they sold, the SEC said.
Mr Haddow concealed from investors his control of the companies, the SEC says. To manage Bar Works, he adopted the alias of “Jonathan Black”, the complaint says.
The skulduggery was needed to obscure Mr Haddow’s checkered history. In 2008, the UK Insolvency Service disqualified him from serving as a company director for eight years following his “misconduct as finance director of Branded Leisure plc”, the SEC said.
In 2013, the Financial Conduct Authority filed a court action against Mr Haddow in the case. One year later, the High Court of Justice ruled that he and several other defendants had unlawfully promoted collective investment schemes. A trial in London on allegations of making misleading statements is scheduled for next month.
As US authorities closed in earlier this year, Mr Haddow stopped paying investors in Bar Works. On March 20, one of his employees emailed him about the FCA’s pending case, recommending that he hire “great lawyers” and retreat to a distant locale.
Mr Haddow replied: “I agree with you totally.”
Prosecutors say that he remains at large.
