Busted: SEC and U.S. Attorney’s Office for the District of New Jersey Files Lawsuits Against Fraudulent ICO that raised $30 million
The U.S. Securities and Exchange Commission filed a civil suit on Friday against Boaz Manor, business partner Edith Pardo and two companies (CG Blockchain Inc. and BCT Inc. SEZC) in connection with an allegedly fraudulent ICO that raised $30 million.
“Learning about the identity and background of the individual or individuals behind a venture is one of the first things we tell investors to do before trusting anyone with their money,” said Joseph G. Sansone, Chief of the SEC’s Market Abuse Unit. “As alleged in our complaint, Manor’s brazen scheme to conceal his identity and criminal history deprived investors of essential information and allowed the defendants to take over $30 million from investors’ pockets.”
According to the SEC’s the defendants marketed and sold digital asset securities in a purported effort to develop technologies for hedge funds and other investors in digital assets.
It was alleged that Canadian 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 after pleading guilty to criminal charges arising from the collapse of Portus Alternative Asset Management – a large Canadian hedge fund.
According to a report in the Financial Post, people who worked at Toronto’s Blockchain Terminal (BCT Inc.) and a related company, CG Blockchain, reactions ranged from “horrified” to “embarrassed” when they realized the red-haired, bearded man they knew as Shaun MacDonald, whom they described as a key player at the firm, was actually Boaz Manor, co-founder of Toronto-based Portus Alternative Asset Management Inc., a $730 million hedge fund that collapsed in 2005 amid a flurry of allegations about offshore accounts, diamonds and missing investor money.
According to Toronto news outlet The Star, Manor received a four-year prison sentence in Canada in 2012 for misappropriating $106 million from the Toronto-based hedge fund he co-founded. In April, The Globe and Mail reported that Manor agreed to repay nearly $8.8 million as compensation and agreed to a lifetime ban from the securities industry.
According to the complaint, Manor portrayed his New Jersey-based associate Edith Pardo as the owner of the businesses, and presented himself as an employee of hers named “Shaun MacDonald.” Manor allegedly admitted to certain investors that he concealed his identity because its disclosure would result in “the company being destroyed.”
The complaint alleges that the defendants claimed to have 20 hedge funds testing technology to record transactions on a distributed ledger or blockchain. In reality, the defendants had only sent a prototype to a dozen funds, and none of the funds used it or paid for it.
In a separate action, the U.S. Attorney’s Office for the District of New Jersey filed a criminal lawsuit against both Manor and Pardo. According to the office’s statement, both were charged with “one count of conspiring to commit wire fraud, three counts of wire fraud, and one count of securities fraud in connection with a blockchain technology company.”
An investigative report by Frank Chaparro published by The Block in December 2018 revealed Shaun MacDonald, who was pitching the token-based project to hedge funds and other investors, was an alias intended to conceal Manor’s true identity and his role in the collapse of the Canadian firm Portus Alternative Asset Management. Manor had previously served a year in prison after pleading guilty to charges in connection with Portus’s fall, as noted in the SEC statement.
Bob Bonomo, the former chief information officer at $500 billion asset manager AllianceBernstein, was titled president of CG Blockchain but allegedly had no power.
Chaparro did a solid job of digging up an attachment in an email sent by adviser Christian Ferri to a hedge fund manager in March showed that 20 crypto hedge funds were beta testing the product, including Dichotomy Capital, Three Bridges Capital, and Zega Financial.
“I was shocked to learn about the deception perpetrated by Shaun MacDonald. I applaud the work of investigative journalists and hope that any bad actors in the cryptocurrency space take note that they will not be allowed to operate in the dark with impunity. I have been and continue to be a strong and consistent voice for full transparency in the cryptocurrency space so that the many great advancements and innovations can be brought to the public.”
Unfortunately, a slew of A-list advisors got caught up in the maelstrom including:
Todd Ruppert – a venture partner at Greenspring Associates, a US-based venture capital firm w/ over $9.0 billion under management
Scott Walker – Angel Investor and Serial Entrepreneur
Chance Barnett – Advisor to numerous family offices
Crystal Rose -Forbes Top Woman in Blockchain
James Duplessie J.D. – Co-Founder Pangea Blockchain Fund
Joel Emery – CEO Tareo Capital Management LP
Ron Quaranta – Chairman, Wall Street Blockchain Alliance
Richard Titus – Former BBC heavyweight and Digital Transformation Specialist
Michael Terpin – Bitcoin luminary and Founder and CEO Transform Group