Investors may think that blockchain-based initial coin offerings are a modern, innovative way to make some money, but they can also be used to perpetuate “old-school frauds,” according to Robert A. Cohen, chief of the agency’s cyber unit.
He’s quoted in an agency announcement that charges David T. Laurance and Tomahawk Exploration with fraud related to an initial coin offering (ICO) to fund an oil exploration and drilling venture in California.
Laurance and his company attempted to raise money for the venture through the sale of blockchain-based digital tokens called “Tomahawkcoins,” by promoting inflated projections of oil production; suggesting the company owned drilling leases when it did not; and claiming the ‘flawless background” of Laurance, who had been convicted previously of securities fraud.
Tomahawk also claimed that token owners would be able to convert the coins into equity and potentially profit from oil production and the secondary trading of the token.
“Investors should be alert to the risk of old-school frauds, like oil and gas schemes, masquerading as innovative blockchain-based ICOs,” said Cohen in a press release.
(Related: SEC Names Cryptocurrency Czar)