Founder and CEO of blockchain startup Shopin Eran Eyal has been arrested and charged with creating a fake initial coin offering (ICO). According to a press release, charges have been brought against him by the United States Securities and Exchange Commission (SEC) for defrauding investors of $42 million.

Eyal ran this scam from August 2017 to April 2018, convincing investors of an ICO and saying that proceeds from the token sale would be used to develop profiles for shoppers which will be powered by blockchain. The profiles will be used to track online customer purchase histories from several retailers and then the resultant data would be analysed to make recommendations. The release also states that Eyal also told his investors he had secured quite a few partnerships with several retailers to help the growth of his endeavour. However, there weren’t any tokens, shopper profiles or partnerships.

Also, the SEC says that Eyal deliberately took funds gotten from investors and used it for personal reasons including a $500,000 sum which he used for a dating service, shopping and also for rent.

According to SEC New York Regional Office Director Marc P. Berger:

“As alleged in today’s action, the SEC seeks to hold Eyal and Shopin responsible for scamming innocent investors with false claims about relationships and contracts they had secured in support of a blockchain-based universal shopper profile. Retail investors considering an investment in a digital asset that meets the definition of a security must be afforded the same truthful disclosures as in any traditional securities offering.”

The SEC is seeking civil penalties, permanent injunctions, disgorgement and also a prohibition which will disallow Eyal and Shopin from running any similar offerings in the future.

Recently, a fake Bitcoin mining investment scheme was also busted and accused of defrauding investors of $722 million.

Image Credits: Unsplash

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