The CEO of California-based Titanium Blockchain has been sentenced to four years in prison, ending a 2018 initial coin offering (ICO) saga that robbed investors of $21 million.
Michael Stollery, who founded Titanium Blockchain Infrastructure Services (TBIS), was a key figure in a "cryptocurrency fraud scheme" involving an initial coin offering for TBIS, conducted between late 2017 and early 2018, according to the Department of Justice.
Investors bought a crypto token called BAR to participate in the ICO. Approximately $21 million was collected from the United States and abroad, according to the Department of Justice.
However, in a US Securities and Exchange Commission (SEC) complaint in 2018, Stollery was accused of failing to register the ICO with the regulator, among other allegations.
In July 2022, he begged guilty of one count of securities fraud for his role in the "fraud scheme."
Admitted to falsifying aspects of TBIS whitepapers and planting fake customer testimonials on the TBIS website, as well as falsely claiming business relationships with the US Federal Reserve, all of which served to mislead investors about legitimacy and TBIS earnings prospects.
He also admitted to commingling ICO investors' funds with his own, using a portion to pay for unrelated expenses such as credit card bills and bills for his Hawaii condo, according to the SEC.
Although he was facing up to 20 years in prison, he will serve a total of four years and three months in prison for his involvement.
Related: Euler Finance exploiter returns over 58,000 stolen Ether
The SEC increases enforcement
The SEC has been stepping up action against the cryptocurrency space in recent years.
According According to Cornerstone Research, the number of cryptocurrency-related litigation filed by the SEC grew in 2022, with 30 enforcement actions against digital asset market participants in the year, up 50% from 20 actions in 2021.
The report found that cryptocurrency enforcement remains a high priority for the SEC under Chairman Gary Gensler. In 2022, the agency initiated 30 cryptocurrency-related enforcement actions, a 50% increase from 2021. https://t.co/TAzXIR7Kjt
โ Cornerstone Research (@Cornerstone_Res) January 18, 2023
Of the total 30 enforcement actions in 2022, 14 involved initial coin offerings (ICOs), and more than half of these included an allegation of fraud.
"Based on its implementation of the US Supreme Court's Howey test, the SEC continues to pursue actions alleging that tokens issued in unregistered security offerings related to ICOs were investment contracts subject to regulation and enforcement of the SEC," said Abe Chernin, vice president of Cornerstone Research. and co-director of his FinTech practice.
โWe have observed an increase in assistance to the SEC from outside agencies and organizations during cryptocurrency-related investigations under the Gensler administration,โ he added.
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