It seems that not a week—or even a day for that matter—can pass without the news that some fraudulent initial coin offering (ICO) has hit the market in one way or another. The latest report comes out of the United States, whose Securities and Exchange Commission (SEC) has obtained a permanent officer-and-director as well as penny stock bars against a company in California and its director who were accused of carrying out an ICO that was deemed to be fraudulent.
According to the SEC’s order, David T. Laurance and Tomahawk Exploration LLC attempted to raise money through the sale of blockchain-based digital tokens called “Tomahawkcoins.” The ICO was allegedly to be used to fund oil exploration and drilling in the state of California.
The regulator said ICO had “fraudulent and wildly optimistic” promotion, showing oil production figures “that were quite fantastic and out of reach.” The company reportedly claimed that it has in its possession leases for drilling sites.
In another twist to the tale, the promotional material described Laurance as having a “flawless background” even though the man had a previous criminal conviction for securities fraud and had been involved in other similar scams of this sort.
The order also found that Tomahawk claimed that token owners would be able to convert the Tomahawkcoins into equity and potentially profit from the anticipated oil production and secondary trading of the tokens. Although the ICO failed to raise money, Tomahawk issued tokens through an ingenious “Bounty Program” in exchange for online promotional services.
In its order, the securities regulator ruled that Tomahawk and Laurance violated the registration and antifraud provisions of the federal securities laws. Laurance and Tomahawk didn’t admit or deny the SEC findings, although they consented to a cease and desist order. Laurance also agreed to the officer and director bar, penny stock bar, and the $30,000 penalty.
“Investors should be alert to the risk of old-school frauds, like oil and gas schemes, masquerading as innovative blockchain-based ICOs,” Robert A. Cohen, chief of the SEC’s Cyber Unit, said in a statement.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
