SEC settles fraud charges against $2.4M SoluTech ICO scam

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The U.S. Securities and Exchange Commission (SEC) has settled fraud charges against yet another ICO scam, this time from New Haven, Connecticut. Known as SoluTech, the startup reportedly conducted an unregistered ICO, violating U.S. securities laws.

SoluTech was founded in September 2017 by Nathan Pitruzzello while he was still a student at the University of New Haven. It claimed to solve the vulnerabilities brought about by storing data on third-party servers through its blockchain-powered data sharing platform.

At a time when every other blockchain startup was conducting an ICO, SoluTech followed suit, issuing an ICO from April to June 2018. During that time, it raised $442,000 in Ether from at least 100 unique addresses by selling its native SCRL token, the SEC said in its filing. While the ICO came to a close in June, the company continued to sell its tokens to investors, raising $1.4 million in these sales that continued until March 2019. Additionally, SoluTech sold $500,000 worth of SCRL tokens directly to an exchange.

The token has since then rebranded and is now known as Data Transaction Token (XD).

According to the SEC, “SoluTech did not register the offer and sale of SCRL tokens as a securities offering with the Commission, nor did the offer and sale of SCRL tokens satisfy any exemption from registration under the federal securities laws.”

The company also presented false and misleading statements to its investors, including claiming that it had paying clients and was generating revenues. In one instance, Pitruzzello showed a prospective investor a doctored profit and loss spreadsheet indicating that SoluTech had generated $1.6 million in income. The investor was instantly convinced and invested $200,000 in the project.

Other false statements included misleading investors to believe that the SCRL tokens were securities that entitled them to an ownership stake in SoluTech. In a March 2018 pitch deck shared with investors, Pitruzzello allegedly told investors that they would get paid for holding SCRL through token appreciation.

Pitruzzello has undertaken to refrain from participating in any digital asset offering in his settlement with the SEC. He is, however, allowed to purchase digital assets for his own personal account.

For SoluTech, the agreement dictates that it has to remove SCRL tokens from all exchanges where they are currently listed. As per CoinMarketCap data, the token is now worth $0.000141, 99.9% down from its all-time high which it hit in July 2018.

SoluTech must also destroy all SCRL tokens in its custody, possession or control within 30 days.

The one party not catered to by the settlement is the investors, with the SEC accepting the company’s offer to forego disgorgement of ill gains. In its statement, the regulator said it has considered “SoluTech’s current financial condition, including that the company is insolvent and has ceased its business operations” in making its decision.