US regulator charges creator of CoinDeal Crypto Scheme, seven others over USD 45 mln fraud

Washington [US], January 5 : The US financial markets regulator Securities and Exchange Commission (SEC) has charged the creator of CoinDeal Crypto Scheme, and seven others for their involvement in a fraudulent investment scheme, where they raised more than USD 45 million from sales of unregistered securities to tens of thousands of investors.
According to the regulator's complaint filed in the US District Court for the Eastern District of Michigan, the involved individuals or entities -- Neil Chandran, Garry Davidson, Michael Glaspie, Amy Mossel, Linda Knott, AEO Publishing Inc, Banner Co-Op, Inc, and BannersGo, LLC -- falsely claimed that investors could generate "extravagant returns" by investing in a blockchain technology called CoinDeal that would be sold for trillions of dollars to a group of prominent and wealthy buyers.
Cryptocurrency involves risks and volatility but the market has attracted traders in recent years as investors look to make quick profits.
"From at least January 2019 to 2022, Chandran, Davidson, Glaspie, Knott, and Mossel allegedly disseminated false and misleading statements to investors regarding the purported value of CoinDeal, the parties involved in the supposed sale of CoinDeal, and the use of investment proceeds," said the US financial market regulator in a statement on Wednesday (local time).
Moreover, it said no such sale of CoinDeal ever occurred and no distributions were made to CoinDeal investors.
The complaint further alleges that the defendants collectively misappropriated millions of dollars of investor funds for personal use and that Neil Chandran used investor funds to purchase items such as cars, real estate, and a boat.
"We allege the defendants falsely claimed access to valuable blockchain technology and that the imminent sale of the technology would generate investment returns of more than 500,000 times for investors," said Daniel Gregus, Director of the SEC's Chicago Regional Office.
"As alleged in our complaint, in reality this was all just an elaborate scheme where the defendants enriched themselves while defrauding tens of thousands of retail investors," Gregus said in the SEC's statement.
The dramatic collapse of the trading platform FTX in 2022 seemed to have added worries among the regulators and central banks. FTX was a high-profile crypto exchange and collapsed in November due to reported misappropriation of customer funds.
The Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a joint statement on Tuesday (local time) regarding crypto risks.
The joint statement cited risks such as fraud and scams, legal uncertainties, inaccurate or misleading representations, and disclosures, and volatility is associated with crypto-assets and the participants and banking organizations should be aware of them.