It is hard to follow the news these days without hearing talk of cryptocurrencies and the ever-increasing regulatory focus on virtual markets. The Securities and Exchange Commission (SEC)’s new Cyber Unit, for one, has made violations involving distributed ledger technology and initial coin offerings (ICO) a top priority. An ICO is used to raise funds for a venture in exchange for a digital asset called a “token” or “coin.” The SEC has already targeted various ICO issuers for investigation or enforcement action, including PlexCorps, a Quebec company charged with its principals in the Cyber Unit’s first enforcement action this past December. (The defendants also have been subject to legal action by Quebec authorities.)

In an Eastern District action, the SEC charged PlexCorps, Dominic Lacroix, and Sabrina Paradis-Royer with various violations of the registration and anti-fraud provisions of the securities laws. SEC v. PlexCorps et al., 17 CV 7007 (CBA) (alleging claims under §5(a), 5(c), and 17(a) of Securities Act, and §10(b) of the Exchange Act). The SEC alleged that the defendants misappropriated approximately $15 million in investor funds through an unregistered ICO of “PlexCoin” or “Plex Coin Tokens” that relied on materially false and misleading statements—including promising returns of 1,354 percent in under 29 days. The SEC obtained an order to show cause, temporary restraining order, and asset-freezing order against all defendants. A preliminary injunction was entered against PlexCorps shortly thereafter, with the individual defendants’ preliminary injunction hearing deferred on consent.