The United States Securities and Exchange Commission (SEC) announced on 2 July 2018 that it has collected a USD 1.6 million fine from two individuals who were illegally selling UBI Blockchain Internet Ltd stocks. This is the result of a coordinated investigation by the Microcap Fraud Task Force as well as the Cyber Unit.
The two individuals are attorney T J Jesky and business affairs manager Mark F DeStefano, who work for the same law firm. They purchased 72,000 restricted shares of UBI Blockchain Internet Ltd under a registration agreement that they would sell the shares for no more than USD $3.70 each. Instead, they sold the shares for up to USD $48.40 each, breaking the law. They profited USD $1.4 million in a 10-day period centering around New Years Day 2018, near the peak of the cryptocurrency rally that saw Bitcoin hit USD $20,000.
By selling the stocks for more than the agreed upon amount in the registration statement they broke the law, and now they are forfeiting all $1.4 million of profits and paying an additional penalty of $188,682. They are going to be under a permanent injunction so that they cannot sell any more stock.
The stock sale ended when the SEC noticed unusual and unexplained market activity, combined with deficiencies in UBI Blockchain Internet Ltd’s SEC filing. The chief of the SEC Enforcement Division’s Cyber Unit, Robert A Cohen, said, “This case is a prime example of why the SEC has warned retail investors to be cautious before buying stock in companies that suddenly claim to have a blockchain business.”
The UBI Blockchain Internet Ltd case is one of many SEC actions against blockchain and cryptocurrency traders, coming at a time that the SEC is tightening its regulatory grip on the industry after declaring that most cryptocurrencies are securities and, therefore, under its jurisdiction.