The US Securities and Exchange Commission (SEC) has accused two companies, their executives and an alleged international gold trader, of running a fraudulent scheme to increase demand for their digital token.
The false promotion of the witness generated more than $36 million in revenue for the defendants, the agency said.
A bogus acquisition of $10 billion in gold bullion
According to a lawsuit filed on Friday (September 30, 2022), a Bermuda company called Arbitrade, a Canadian firm Cryptobontix, Troy Hogg, founder and owner of Cryptobontix, James Goldberg, Stephen Braveman, COO of Arbitrade, and Max Barber, a -the so-called international gold trader ran an alleged bomb and dump scheme involving a cryptocurrency called Dignity (DIG) from 2017 to 2019.
As stated in the SEC complaint, Hogg employed Russian developers in 2017 to create Dignity, an Ethereum-based token, which was owned and controlled by Hogg and Cryptobontix. The coin began “exclusive trading” on Livecoin, a Russian crypto trading platform.
Both Arbitrade and Cryptobontix claimed through announcements that the former bought and received $10 billion worth of gold bullion from SION, a company owned by Barber, with each of the three billion DIG tokens backed by $1 gold
The companies also claimed they got an auditing firm to audit the gold as a way to boost investor confidence. However, the SEC alleged that both the gold purchase and the gold audit never happened as they were tactics to get investors to buy the DIG tokens.
The value of the DIG token has dropped to zero
The SEC also claimed that Hog and Goldberg sold DIG to Livecoin at “artificially inflated prices,” resulting in total proceeds of $36.8 million. Interestingly, DIG withdrew from the Livecoin platform from February 2020 after the value of the token dropped to zero.
As stated in the lawsuit, investors participated in what they believed to be an investment opportunity by pledging their funds to bitcoin or any other crypto.
Accordingly, the SEC is charging the defendants in the case “violate the anti-fraud and securities registration provisions of the federal securities laws.” In addition, the regulator’s complaint seeks restitution of ill-gotten gains plus prejudgment interest, permanent injunctive relief and civil monetary penalties.
In addition, the SEC is asking the court to issue an admission of officers and directors for all individuals named in the lawsuit.
Binance Free $100 (Exclusive): Use this link to sign up and get $100 free and 10% off fees on Binance Futures in your first month (terms).
PrimeXBT Special Offer – Use this link to sign up and enter code POTATO50 to receive up to $7,000 in your deposits.