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SEC Charges Founder, Digital-Asset Issuer With Fraudulent ICO

(HedgeCo.Net) The Securities and Exchange Commission has charged a digital-asset entrepreneur and his company with defrauding investors in an initial coin offering (ICO) that raised more than $42 million from hundreds of investors.

The SEC’s complaint alleges that from August 2017 to April 2018, Eran Eyal, founder of UnitedData, Inc. d/b/a Shopin, conducted a fraudulent unregistered securities offering by selling Shopin Tokens in an ICO. Shopin aimed to use the funds from the sales of the Shopin Tokens to create universal shopper profiles, maintained on the blockchain, that would track customer purchase histories across online retailers and recommend products based on this information. As alleged in the SEC’s complaint, Shopin never created a functional platform. The complaint further alleges that Eyal and Shopin repeatedly lied to investors in connection with its offering, including misrepresentations about purported partnerships with certain well-known retailers and about the involvement of a prominent entrepreneur in the digital-asset space. The SEC also alleges that Eyal misappropriated investor funds for his personal use, including at least $500,000 used for rent, shopping, entertainment expenses, and a dating service.

“As alleged in today’s action, the SEC seeks to hold Eyal and Shopin responsible for scamming innocent investors with false claims about relationships and contracts they had secured in support of a blockchain-based universal shopper profile,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “Retail investors considering an investment in a digital asset that meets the definition of a security must be afforded the same truthful disclosures as in any traditional securities offering.”

The SEC’s complaint, filed in federal district court in Manhattan, charges Eyal and Shopin with violating the antifraud and registration provisions of the federal securities laws, and seeks permanent injunctions, disgorgement with interest, and civil penalties, as well as an officer-and-director bar against Eyal and a bar against Eyal and Shopin prohibiting them from participating in any future offering of digital-asset securities.

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