Compliance; solve it with the blockchain. Operational due diligence; solve it with the blockchain. Shortcomings of separately managed accounts; solve it with the blockchain. Financial audits; solve it with the blockchain.
Shaun MacDonald, managed to squeeze $30 million in ICO funding from investors for his idea to create ComplianceGuard, a blockchain based tool for funds, and a blockchain terminal, crypto-focused version of the ubiquitous Bloomberg Terminal. According to the SEC complaint, the tools were not in production. That and other materially false and misleading statements were made in the illegal sale of securities that was the ICO.
The first problem is that Shaun MacDonald is really Boaz Manor. In 2010, Mr. Manor pleaded guilty in Ontario, Canada to the crimes of laundering the proceeds of a crime and disobeying an order of a court. Both charges related to the 2005 collapse of the hedge fund firm Portus Group. Mr. Manor darkened his hair, grew a beard, and used aliases to hide his identity and conceal the fact that he had served a year in prison.
It started with ComplianceGuard. A box-shaped device that was supposed to do something compliance-y. It was enough to convince people to give him $775,000 through a token offering. It looked something like this. The whitepaper is full of great compliance-related themes. But I don’t see any actual description of a solution to those compliance requirements
Mr. Manor managed to put the device in the hands of a few hedge funds. But according to the SEC complaint, none of them actually used it. It basically functioned as an extra electronic hard drive for the storage of manually entered transaction data. None of the funds paid for the devices.
Then the company pivoted harder to blockchain with the blockchain terminal. That caught the attention of token purchasers and the company raised $30 million.
Clearly, it was more sexy than compliance.
The company actually made a product and sent it to to funds for use. It’s not clear than anyone actually used those terminals or even if they did anything useful.
I’m going to guess that the ICO fundraising was better than the terminals.
In the end, the SEC has all of the alleged fraud. But it also has the fraud of the disguised Mr. Moran.
On top of that, it has a claim for the unregistered sale of securities. The company did file a for Form D for 506(c) offering. But that form of offering requires you to take reasonable steps to verify that the purchaser is an accredited investor. The SEC claims that those steps were not taken.
Sources:
- SEC Charges Convicted Criminal Who Conducted Fraudulent ICO Using a Fake Identity
- SEC Complaint
- CG Blockchain White Paper #1
- ComplianceGuard User Manual
- Financial Criminal Allegedly revealed as figure behind ‘blockchain terminal’ ICO
- Two identities, one man: the story of $800 million hedge fund fraudster Boaz Manor who led the alleged $31 million Blockchain Terminal ICO
