USAO Secures Guilty Plea in Fraud Using Crypto Currency
Last week the SEC resolved two ICO actions that will become the blue print for settling unregistered crypto currency actions in the wake of the Section 21(a) DAO report detailing how the federal securities laws apply to the offerings. See, e.g., In the Matter of Carriereq, Inc., D/B/A Airfox, Adm. Proc. File No. 3-18898(Nov. 16, 2018).This week the U.S. Attorney’s Office secured a guilty plea in a case where investors were solicited to invest in binary options and their cash was converted to a worthless crypto coin. U.S. v Kantor, No. 18-CR-177 (E.D.N.Y.).
Defendant Blake Kantor, also known as Bill Gordon, conducted a fraudulent investment scheme in which investor cash was converted to what was represented to be a valuable cryptocurrency – ATM Coin. Beginning in March 2014 Mr. Kantor established the Blue Bit Banc or Blue Bit Analytics, Inc. The firm sold binary options, a form of highly speculative investment that has been banned in some countries. Over a three year period beginning in 2014 Mr. Kantor and his confederates solicited investors for Blue Bit Bank, raising about $1.5 million from over 700 investors.
Investors were not told that the computer software used by Blue Bit altered the data used in connection with the binary options in a manner which made it most difficult for them to make a profit – the high risk options many consider gambling became virtually no gamble for Mr. Kantor. Investors were also not told that the ATM Coin they received was worthless.
In October 2017 Mr. Kantor and others involved with the scheme took steps to evade detection. Customer lists were altered after FBI agents told Mr. Kantor that they were investigating. Mr. Kantor also met with the agents and misinformed them about the business, claiming he had not had any involvement with it for a period of time.
Defendant Kantor was charged with conspiracy to commit wire fraud, obstruction of an official proceeding and making false statements to Special Agents of the FBI. Mr. Kantor pleaded guilty to conspiracy to commit wire fraud. In connection with his plea agreement Mr. Kantor admitted to obstructing an investigation into his fraudulent scheme. The date for sentencing has not been set.
Program: The Fifth Annual Dorsey Federal Enforcement Forum will be held on December 5, 2018. The program, centered on a tech theme and SEC enforcement, includes a keynote address on artificial intelligence and its impact on the legal profession, panels analyzing critical issues facing SEC enforcement, the question of broker protocols, trends in investment adviser inspections, how to conduct an ICO and concludes with an address on cyber-security and internal controls. A holiday gathering follows. The program and registration for it and the party are here or separate registration for the holiday party only here.