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The Securities and Exchange Commission (SEC) has filed an emergency action against a self-styled cryptocurrency guru for allegedly engaging in securities fraud. The complaint, which was filed on August 12, accuses Reginald Middleton of raising $14.8 million in an illegal securities sale. The complaint sought to stop Middleton and his company Veritaseum Inc. from dissipating any more of the funds raised.

Middleton, a self-styled financial guru from Brooklyn, advertised Veritaseum as a company that would replace banks, brokers and hedge funds. The company generated VERI tokens on the Ethereum blockchain and sold them in an ICO that ran in April and May of 2017.

The SEC alleges that Middleton and his company misled the investors to believe that they had a product that would generate millions of dollars of revenue. They also placed a series of manipulative trades in VERI tokens which pumped their price and led the investors to buy more tokens.

Veritaseum set out to sell 51 million of the 100 million pre-mined VERI tokens, pegging the value of the tokens to the value of Ether at a 1:30 ratio. This placed the price of VERI tokens between $1.6 and $8. The complaint stated, “After the ICO phase, but while they were still selling VERI to investors, defendants continued to promise to limit their own VERI sales, while touting fictitious deals that had purportedly netted $35 million and were increasing VERI’s price.”

The regulator accused Middleton of misappropriating at least $552,000 of the money raised in the ICO for his own personal and undisclosed use. He also started purchasing precious metals in August 2018, with the proceeds from the trade flowing directly to a bank account he owned.

By engaging in the conduct set forth in the complaint, defendants engaged in violation of the Securities Act. […] Middleton also engaged in the manipulation of securities prices in violation of the Exchanges Act.

The regulator asked for an emergency and preliminary freezing of the defendants’ assets. The complaint also requested for an order prohibiting Middleton from destroying or altering any documentation as well as barring him from acting as a director of any public company.

New York has seen an increasing number of cases brought against crypto-related companies in the recent past. Last month, New York prosecutors unsealed fraud charges against the principal of a crypto escrow firm accused of defrauding $7 million from his clients. Just weeks earlier, a victim of the mega OneCoin cryptocurrency scam filed a lawsuit in the state revealing the extent of the scam. The plaintiff claimed to have lost over $750,000 in just 11 months.

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