The US Securities and Exchange Commission (SEC) has accused two cryptocurrency firms of a pump-and-dump scheme.
The scheme inflated the value of a new digital asset by the name of Dignity (DIG).
SEC outlined the accusations as part of a press release in which it explained why it believed that Arbitrade Ltd and Cryptobontix Inc, based in the Bermudas and Canada respectively, had participated in the scheme, and how.
The two companies claimed in a period between May 2018 and January 2019 that they acquired and received $10bn in gold bullion and that the company was going to back each DIG token with up to $1 of gold.
However, according to SEC, this gold acquisition had not happened, and was a ruse to give the companies a chance to whip up interest in the token.
SEC continued by explaining that some $36.8m worth of DIG was sold as a result, including to US investors, and that the prices were inflated by the two companies to profiteer through dishonest means.
According to the regulator, the defendants had breached antifraud and securities registration provisions laws and they will now have to face the regulator’s decision.
While not final, SEC has experience going after companies from the sector and succeeding in either stopping their operations or bringing them to justice.
SEC admittedly works with a huge backlog, but companies that colour around the lines are unlikely to get a pass as the regulator makes sure to scrutinize past transgressions as much as new ones.
All defendants in the latest case face civil penalties and will be brought to trial, the complaint assures.
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