John O’Rourke, chief executive officer of Riot Blockchain, has been kicked to the curb following allegations that he was involved in a massive pump and dump scheme that generated an estimated $27 million.
Last Friday, the U.S. Securities and Exchange Commission (SEC) charged 10 individuals in connection with alleged fraudulent schemes selling unlawful stocks and causing “significant harm to retail investors who were left holding virtually worthless stock.” In its complaint, the securities regulator identified Barry Honig, Riot’s former largest shareholder, as the leader of the so-called “microcap fraudsters,” which also included O’Rourke.
According to the SEC, Honig bought large quantities of stocks at steep discounts, resulting in him having a substantial ownership interest in the companies. His group then illegally promoted and engaged in manipulative trading to pump stock prices, which, in turn, created the appearance of active trading volume. Then, Honig and his cohorts dumped their shares after “reaping millions of dollars at the expense of unsuspecting investors.”
Sanjay Wadhwa, senior associate director in the SEC’s Division of Enforcement, said in a statatement: “As alleged, Honig and his associates engaged in brazen market manipulation that advanced their financial interests while fleecing innocent investors and undermining the integrity of our securities markets. They failed to appreciate, however, the SEC’s resolve to relentlessly pursue and punish participants in microcap fraud schemes.”
A day after the SEC announcement, Riot declared that it would be restructuring the company’s senior executives,” and named Chris Ensey as its new CEO.
In its announcement, Riot did not mention the charges filed against O’Rourke, only stating that, “Mr. Ensey is expected to continue to aggressively pursue the exploration of the company’s Riotx digital currency exchange under license from Coinsquare and expanded opportunities for digital asset and cryptocurrency businesses. The move follows the resignation of John O’Rourke, the company’s chairman and CEO.”
Riot Blockchain jumped from biotech to blockchain in 2017, resulting in its stocks jumping. However, the company said it has suffered losses following several SEC investigations in the last several months. In April, Riot revealed that the securities regulator sent a subpoena, saying that the company is facing possible removal from the NASDAQ for not adhering to policies.
Several months later, the company received another letter from the SEC, which had begun looking into a number of Riot’s registration statements as well as its purchase of a minority stake in Canadian cryptocurrency exchange Coinsquare.
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