DoJ charges 2 over using fake identities to commit $30M ICO fraud

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The U.S. Department of Justice (DoJ) has charged two people allegedly behind a $30 million fraudulent initial coin offering (ICO). The two were the operators behind CG Blockchain Inc., a company that claimed to develop blockchain-based audit tools. However, one of them used a fake identity while the other lied about being a prominent investor.

It all started with Boaz Manor, a 46-year-old resident of Toronto, Canada. Manor is alleged to have founded CG Blockchain Inc. which developed ComplianceGuard, an auditing tool powered by the blockchain. He partnered with Edith Pardo, a 68-year-old Israeli citizen who resides in Essex County, New Jersey, who allegedly served as a conduit for the money. The two solicited funds from investors for their company, claiming that over 20 hedge funds were already using ComplianceGuard.

This wasn’t the only lie they fed the investors, the DoJ revealed. Manor had been arrested in 2003 in connection to financial crimes he committed in his capacity as a hedge fund executive in Canada. To hide his previous identity, he adopted a new name, Shaun MacDonald. He also dyed his hair and grew a beard to complete the transformation. Information on this Blockchain terminal ICO fraud had been unearthed previously by TheBlock, as we reported.

Pardo reportedly posed as a wealthy investor who had put in millions of dollars in the business.

Getting the early investors onboard emboldened the two enough to conduct an ICO in 2017. To hype their ICO, they announced a new product, Blockchain Terminal, which they said allowed hedge funds to trade and manage crypto. They also lied to investors that Blockchain Terminal was in use by 20 hedge funds.

The ICO was a great success, with Manor revealing that it had raised $30 million. Unfortunately for him, the ICO also put him on the limelight, leading some investors to discover that he was using a fake identity. The DoJ alleges that he even came clean and revealed that he had faked his identity, but it was all to protect the company, which the investors apparently believed.

Manor and Pardo are facing charges of conspiracy and wire fraud counts, which carry a maximum penalty of 20 years in prison and $250,000 in fines or twice the gross gains. The DoJ also charged them with securities fraud, a crime which could see them serve another 20 years in prison and pay $5 million in fines.

Manor, a dual citizen of Israel and Canada, is still at large. The SEC has also filed a civil complaint against the two based on the same conduct.

CG Blockchain was on the wrong side of the law again previously. As CoinGeek reported, FactSet, a financial research company sued it for failure to make licensing payments. CG Blockchain had signed a contract with FactSet to use the latter’s technology and to integrate it with its own. The two had settled on a $3.8 million fee, but CG Blockchain had failed to settle the fees.