As such, the Brooklyn “financial guru” and two entities under his purview, Veritaseum, Inc. and Veritaseum, LLC, were charged with violating registration and antifraud provisions in U.S. security law. Middleton, himself, was additionally charged with violating antifraud provisions with respect to manipulative trading, according to the SEC.
The complaint alleges Middleton “marketed and sold” VERI tokens over the internet while misleading investors regarding prior business interests, invented investor demand for the token and lied about having a revenue-generating product ready. He is also accused of manipulating the price of the VERI tokens using an “unregistered digital asset platform.”
After selling the tokens, Middleton then allegedly dissipated investor assets into his personal account. Marc P. Berger, director of the SEC’s New York Regional Office, said, at that point, protecting investors became a priority. On Aug. 12, emergency action was taken to freeze at least $8 million of money Middleton reportedly raised offering digital securities in 2017 and 2018. “After learning about Middleton’s transfer of funds, we took quick action to prevent the further dissipation of investor assets,” Berger said. “Whether in digital currency or plain cash, we will act to protect investor assets and to pursue fraud and manipulation in our securities markets.”
According to the SEC, the complaint seeks “permanent injunctions, disgorgement plus interest and penalties, and a bar from offering digital securities.”
CipherTrace Report: Thefts and Scams in 2019 Top $4B
Blockchain forensics organization CipherTrace issued its Q2 report and found an aggregate loss of $4.26 billion to victims of cryptocurrency scams and theft. The Q2 2019 Cryptocurrency Anti-Money Laundering Report shows “several trends continued or accelerated” and insiders were, by far, the biggest culprits of purported criminal activity. The report covers alleged activity from around the globe and a number of topics, including Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF).
Among some of the examples of foul play were theft directly from cryptocurrency exchanges. “Rivalling robberies in the first quarter, hackers stole more than $124 million from exchanges and infrastructure in Q2, making a total of $227 million stolen from exchanges so far this year. In addition, $851 million was ‘lost’ by Bitfinex,” reads the report.
Another purported “Ponzi” scheme cost millions of investors $2.9 billion in cryptocurrency assets when the Plus Token exchange and app went offline. According to the report, Chinese police arrested six nationals in Vanuatu after the incident. The report also details new evidence of “long-running fraud” stemming from the highly publicized QuadrigaCX “fiasco” where users lost $195 million after its CEO suddenly died.
“While the total dollar value of Q2 2019 thefts would currently be dramatically higher due to the recovery of cryptocurrency prices from the lows of the crypto winter, this report uses the value of the lost loot at the time of the scam or robbery,” reads the report. “Also, these numbers reflect only the losses that CipherTrace has validated; undoubtedly more losses occurred during the quarter.”
