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In Latin, “veritas” means truth. The U.S. Securities and Exchange Commission (SEC) didn’t think there was much truth in an illegal initial coin offering (ICO) offered by Reginald Middleton and his Veritaseum initiative, so it slapped him with an injunction and froze all assets related to the platform. Now unable to access the funds, Middleton is crying foul and wants the SEC to release the money while alleging that the freeze is only hurting investors.
Middleton published court documents (in pdf) yesterday supporting his belief that the SEC was wrong in freezing the assets, and wrong in continuing to hold them. He argues that, contrary to the SEC’s assertions, the VERI tokens offered through the ICO and the company are not securities and do not fall under the purview of the SEC. He points out that the courts didn’t order his personal assets to be frozen – just those of the company – and uses this as an indication that the SEC may not be totally behind the claims of illegal security offerings.
Middleton adds, “The temporary freeze in this case has already caused significant harm to the holders of Veritaseum’s utility tokens, the very people the SEC is purportedly seeking to protect. The SEC has put forth no evidence that Mr. Middleton has dissipated or concealed company assets or is likely to do so in the future. Funding Veritaseum’s lawful business operations is not dissipation and does not harm the holders of its utility tokens. On the contrary, the company’s activities benefit token holders by creating additional ways for them to use their tokens and thereby enhancing the tokens’ value.”
Veritaseum’s ICO raised just under $15 million from 2017 to 2018. The SEC asserts that around $8 million in investor money is outstanding from the ICO, leading to the injunction and the asset freeze on the belief that the money had been transferred from Veritaseum’s accounts to accounts held personally by Middleton.
The self-proclaimed financial wizard adds that “beyond the fatal absence of a security, the SEC has also failed to establish a likelihood of success on its securities fraud and market manipulation claims.” However, the SEC has asserted that Middleton and his cohorts conducted manipulative trades related to VERI tokens in an effort to boost the token’s price and make it more attractive to investors.
A judge will now have to rule on Middleton’s request. At this point, the decision could go either way but, given the high amount of ICOs that were found to be fraudulent last year, it wouldn’t be surprising to find Middleton’s arguments denied.
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