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This article was published on August 30, 2019

Blockchain startup agrees to $23M settlement over allegedly fraudulent tokens

One token supposedly gave interest in a non-existent cryptocurrency mining facility ...


Blockchain startup agrees to $23M settlement over allegedly fraudulent tokens
David Canellis
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David Canellis

David is a tech journalist who loves old-school adventure games, techno and the Beastie Boys. He's currently on the finance beat. David is a tech journalist who loves old-school adventure games, techno and the Beastie Boys. He's currently on the finance beat.

The US’ top financial watchdog has settled with Dallas-based blockchain startup Bitqyck Inc. over allegations it fraudulently sold shares of company stock to more than 13,000 buyers of its Bitqy cryptographic token.

In a statement released yesterday, the US Securities Exchange Commission (SEC) also alleged the firm and its founders Bruce Bise and Sam Mendez fraudulently promised investors interest in a cryptocurrency mining facility through sales of a secondary token, BitqyM, and its related blockchain-powered smart contract.

That facility was supposed to be powered by below-market rate electricity. As it turns out, there was no such deal, and no such facility – the entire mining operation was a fake.

“Bitqyck, aided and abetted by its founders, also is alleged to have illegally operated TradeBQ, an unregistered national security exchange offering trading in a single security, Bitqy,” said the SEC.

Although Bitqyck’s founders did not confirm or deny the allegations, the pair agreed to return all money raised (more than $13 million) with interest.

Bise and Mendez will also need to pay a civil penalty of $8,375,617, as well as $890,254 and $850,022 respectively.

This continues a veritable trend of judgements against (allegedly) fraudulent cryptocurrency startups across the US and beyond.

Earlier this month, the SEC moved against a “self-described financial guru” that raised $14.8 million with an allegedly fraudulent ICO, while last week saw the SEC reach a settlement with a Russian firm that advertised initial coin offerings without disclosing that it had been paid to shill the coins.

Whoops.

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