The founder of Titanium Blockchain Infrastructure Services Inc. (TBIS) has received four years and three months in federal prison in connection with defrauding hundreds of investors of over $21 million.
Michael Stollery, the project’s founder, pleaded guilty to charges bordering on security fraud in the scheme that dates all the way to 2017. Prosecutors say Stollery misled investors by claiming to offer impressive returns on deposits which turned out to be a hoax.
Stollery reportedly misrepresented the contents of the project’s white paper and forged client testimonials on TBIS’ website to lure in investors to his initial coin offering (ICO). In a bid to portray legitimacy, Stollery told investors that he had extensive links with several high-value companies in the United States and the Federal Reserve.
“Stollery did not use the invested money as promised but instead commingled the ICO investors’ funds with his personal funds, using at least a portion of the offering proceeds for expenses unrelated to TBIS, such as credit card payments and the payment of bills for his Hawaii condominium,” the Department of Justice (DoJ) statement read.
The U.S. Securities and Exchange Commission (SEC) warned investors that TBIS was not authorized to carry out an ICO, given his failure to seek registration with the Commission. Furthermore, the SEC disclosed that Stollery’s firm was not given any exemption to offer securities to the public.
Given the weight of the charges against him, Stollery was staring at up to 20 years in prison, but it appears that his willingness to cooperate with authorities and offer restitution to victims contributed to a reduced sentence. Stollery pleaded guilty to one count of securities fraud in 2022 in a case spearheaded by the DoJ, the FBI, the Federal Reserve, and the Bureau of Consumer Financial Protection.
Since the start of 2023, the DoJ has been racking up several wins against bad actors in the digital currency space. Barely weeks after the DoJ announced that it had opened investigations into the collapse of Terra for fraud, law enforcement arrested its founder, Do Kwon, in Serbia after nearly 12 months on the run.
A trail of victories in their wake
The trail of victories left by the DoJ against digital currency bad actors has been hailed by industry stakeholders as being key in preserving investor confidence in the sector. Cornerstone Research noted that enforcement action from the SEC and other law enforcement agencies in 2022 climbed by over 50% from 2021.
The bulk of the cases are linked to the ICO book of 2017 and come on the heels of the commission increasing the size of its digital currency monitoring unit and a strict application of the Howey Test.
In September, the DoJ announced the creation of a new network to crack down on digital asset crime, with the team made up of 150 officials from the U.S. Attorneys’ Offices across the country.
Watch: Law & Order Regulatory Compliance for Blockchain & Digital Assets
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