Ex-Riot Blockchain CEO Settles in Penny Stock Manipulation Case

Ex-Riot Blockchain CEO Settles in Penny Stock Manipulation Case

Three defendants settled with the SEC for running a pump-and-dump stock scheme and will pay penalties over $3 million

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On March 6, three individuals including former Riot Blockchain CEO John O’Rourke III agreed to settle with the United States Securities and Exchange Commission (SEC) for $3.5 million over three alleged penny stock pump-and-dump schemes.

The terms of the settlement will see Michael Brauser, John Stetson, and O’Rourke pay disgorgement, prejudgment interest and civil penalties. The trio will not admit or deny the allegations laid out in the SEC’s 2018 enforcement action against the trio.

“Microcap fraudsters” settle with SEC

O’Rourke’s and Stetson will each have to pay penalties exceeding $1.15 million, while Brauser will have to pay roughly $1.17 million.

O’Rourke, O’Rourke’s company ATG Capital, Brauser, and Brauser’s Grander Holdings are permanently banned from engaging in all activities relating to penny stock offerings, while Stetson and Stetson Capital Investments are prohibited from involvement in penny stock offering for 10 years.

The judge also issued a partial ruling against HS Contrarian Investments — a company for which Stetson was the managing director.

O’Rourke left Riot Blockchain during September 2018 following the SEC’s enforcement action against him. O’Rourke was replaced by Riot’s then-chief operating officer Chris Ensey.

Riot Blockchain investor allegedly masterminded penny stock manipulation

The three individuals and four companies are the last to settle in the case — which brought charges against 10 individuals and 10 corporate entities concerning three alleged pump-and-schemes masterminded by venture capitalist and Riot Blockchain investor Barry Honig.

The group of 20 individuals and companies allegedly generated more than $27 million in profits through a coordinated manipulation of three microcap penny stocks. The SEC described their actions as comprising “brazen market manipulation” that involved “fleecing innocent investors [who] were left holding virtually worthless stock.”

The SEC alleged that Honig orchestrated the acquisition of large sums of penny stock issuers’ shares for discounted prices, before he and his associates “engaged in illegal promotional activity and manipulative trading to artificially boost each issuer’s stock price and to then give the stock the appearance of active trading volume,” then “[dump] their shares into the inflated market.”


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Three defendants settled with the SEC for running a pump-and-dump stock scheme and will pay penalties over $3 million

Texas Court Orders Defendants to Pay $400K for Fraudulent Bitcoin Scheme

Texas Court Orders Defendants to Pay $400K for Fraudulent Bitcoin Scheme

A Texas court has ordered two individuals to pay $400,000 in fines and repayment for a fraudulent Bitcoin scheme

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A Texas Federal Court has ordered two defendants to pay $400,000 for conducting a fraudulent scheme to solicit Bitcoin (BTC) from members of the public, the United States Commodity Futures Trading Commission (CFTC) announced on July 10.

Judge Reed C. O’Connor of the U.S. District Court for the Northern District of Texas filed an Order and Default Judgment on June 28, 2019, alleging that U.S. citizens Morgan Hunt and Kim Hecroft engaged in a fraudulent scheme to solicit Bitcoin from the public to invest in trading products like binary options, diamonds and foreign currency contracts. The defendants allegedly did business through entities called Diamonds Trading Investment House and First Options Trading.

The order specifically claims that the defendants “falsely claimed that they would use customer funds to invest in trading for the benefit of the customers, misrepresented their experience and track record as traders and portfolio managers, falsely told customers that they could not withdraw their purported investment profits without first paying a tax to the CFTC, and misappropriated customer funds.”

The court now requires that Hunt and Hecroft pay restitution and a $180,000 civil monetary penalty each, as well as imposing permanent trading and registration bans. According to the announcement, the defendants may be unable to repay victims due to a lack of sufficient funds.

In mid-June, the CFTC filed a complaint with the New York Southern District Court against the now-defunct United Kingdom-based entity Control-Finance Ltd, which allegedly defrauded more than 1,000 investors to launder at least 22,858 BTC.

As a recent report from Chainalysis revealed, the amount of Bitcoin spent on illegal transactions in 2019 could hit a record high of $1 billion, even as the ratio of illegal to legal transactions is shrinking.


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A Texas court has ordered two individuals to pay $400,000 in fines and repayment for a fraudulent Bitcoin scheme