The SEC just busted its first ICO scam

On Monday, the SEC shut down villainous-sounding cryptocoin startup, PlexCorps, which raised $15m from thousands of investors through ICO.

December 5, 2017

On Monday, the Securities and Exchange Commission announced it had successfully halted the initial coin offering of already villainous-sounding cryptocoin startup, PlexCorps.

Earlier in the year, PlexCorps raised $15m from thousands of investors through the ICO on the false promise that investors would get a 13x return.

Until now, ICOs have gone largely unregulated — and this marks the first time that the SEC’s new “Cyber Unit” has busted one for fraud.

What’s an ICO, again?

In the traditional initial public offering (IPO) — a company allows the public to invest in a chunk of itself.

An ICO, used by cryptocurrency startups, is more like crowdfunding than investing: a company offers a percentage of its own (often valueless) coins to “backers” in exchange for coins with established value (i.e. Bitcoin). 

These backers are essentially giving crypto donations through an ICO and banking on eventual returns.

Companies have raised $3.5B through ICOs in 2017 alone — but since they’re still fairly new, the law is still adjusting to regulate them.

Initial coin bust

According to the SEC, PlexCorps’ ICO “hit all of the characteristics of a full-fledged cyber scam,” offering “false promises” (a 13x return) to the thousands of get-rich-quick hopefuls.

In a suit filed against PlexCorps, the SEC called out founder Dominic Lacroix and made it clear they’d seek steep fines and ban him from offering digital securities in the future.

PSA: Be wary of ICOs

Regulatory agencies have ramped up their efforts to inform and protect the public from such abuses, advising against investing in ICOs touted by celebs, or those that promise massive returns.

For many in the crypto space, this is welcome news: as Bitcoin lurches above $11k, new regulations only gives established coins more credibility in a time of uncertainty.

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