Former Washington senator faces arrest over $4.3M ICO scam

A former U.S. state senator is subject to an arrest warrant issued by a court in Texas, over his alleged involvement in an initial coin offering (ICO) scam.

Ex-state Sen. Dave Schmidt was previously under investigation by the Securities and Exchange Commission (SEC) concerning a $4.3 million ICO scam, which saw unsuspecting investors from the U.S. and elsewhere embroiled in the scheme.

The former Washington senator is said to have profited from the scheme, which raised investment for the issue of Meta 1 coins—tokens allegedly backed by either $1 billion in fine art or $2 billion in gold reserves. However, after raising millions through the ICO, it emerged that the tokens did not exist.

A bench warrant was issued for Schmidt’s arrest, along with accomplice Robert Dunlap after the pair failed to appear in court. Their appearance had been scheduled by video link due to the ongoing coronavirus pandemic, with both failing to appear at the agreed time.

A third defendant has been given a further opportunity to appear in court by video link, before likely facing a similar fate.

The arrest warrant follows moves from the SEC to freeze all bank accounts associated with the ICO last month, after serious concerns about its management emerged. The regulator brought forward fraud charges against the promoters of the scheme, including Schmidt, which ultimately led to the issuing of the arrest warrant.

In particular, the SEC flagged concerns about Meta 1 being an unregistered security, and one which did not qualify for any of the existing regulatory exemptions. The regulator is now seeking permanent injunctions, financial penalties and disgorgement of any gains arising from the token issue.

Describing a fine as “neither…especially burdensome nor particularly effective” against the defendants, the judge presiding over the hearing opted instead to move straight to arrest.

“If incarcerated, Dunlap and Schmidt will be unable to continue Meta 1’s operations, create marketing videos, or email their putative investors.”

The case sees Schmidt become the latest high profile individual to be embroiled in an ICO scam, with a number of celebrities including Steven Seagal and Floyd Mayweather previously implicated in suspicious ICOs.