SEC Charges Shopin with Defrauding Investors In a $42 Million ICO

Shopin ICO hit by SEC

The U.S. Securities and Exchange Commission (SEC) has charged the cryptocurrency company Shopin, and its Chief Executive Eran Eyal, with defrauding a large number of investors in a $42 million Initial Coin Offering (ICO).
According to the SEC’s announcement, the founder of Shopin was deceiving investors by selling unregistered securities in the form of Shopin Tokens. While Eyal allegedly planned to create a platform that would enable the tracking of client profiles across several retailers, Shopin never developed the platform, the SEC claimed.

The SEC added that Eyal “misappropriated investor funds for his personal use,” for developing a dating service.
The CEO is charged for misappropriating a minimum of $500,000 to his own interest.
“As alleged in today’s action, the SEC seeks to hold Eyal and Shopin responsible for scamming innocent investors with false claims about relationships and contracts they had secured in support of a blockchain-based universal shopper profile,” stated Marc P. Berger, Director of the New York Regional Office. 

“Retail investors considering an investment in a digital asset that meets the definition of a security must be afforded the same truthful disclosures as in any traditional securities offering.”

According to the release, Eyal pled guilty to being involved in 3 securities fraud schemes, one of them being Shopin ICO. In the framework of the agreement, around $450,000 in an unrevealed digital currency will be turned over to the New York State Attorney General’s office, and Eyal will resign from his position as CEO of Shopin.

Eyal will have to pay $125,000 as compensation, and an additional $475,000 in judgments to investors in Springleap, his previous company. Former New York Attorney General Barbara Underwood accused Eyal of stealing $600,000 from the Springleap’s investors in 2017.
Springleap was a marketing and advertising company that provided services for digital media and platform design. In the period between 2014 and 2015, Eyal allegedly encouraged investors to invest in Springleap by deceptively representing the company’s management team, the board of advisors, creative directors and customer base, said the attorney general.

Eyal is also charged with not registering the Shopin coin sale as a securities sale. Additionally, the SEC is seeking a permanent injunction, disgorgement, civil penalties, to permanently prevent Eyal from becoming an executive in any public company again, as well as from taking part in any further token sales.
The present New York Attorney General Letitia James allegedly been investigating Shopin and Eyal since June 2019, as reported by Ventureburn.

It was also reported that Eyal provided a list of names and email addresses of his investors to the investigators at that time.
It looks like the SEC will not slow things down in the case of regulatory enforcement in the cryptocurrency world. During the last few years, billions of dollars were raised through ICOs to finance new businesses and technology.

At the height of the ICO boom of 2017-2018, a large number of companies that conducted and benefited from ICOs failed to comply with any security rules. SEC Chairman Jay Clayton has said that almost every ICO he has seen, except Ethereum, constitutes as a securities offering.