Bitcoin exchange to dollar rate on monitor display on July 2017 in NYC
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The U.S. Securities and Exchange Commission (SEC) has charged convicted hedge fund fraudster Boaz Manor, his business associate, and two businesses, CG Blockchain Inc. and BCT Inc. SEZC, with raising more than US$30 million from hundreds of investors in a fraudulent initial coin offering (ICO), the regulator announced Friday.

Between August 2017 and September 2018, the defendants marketed and sold digital asset securities in a purported effort to develop technologies for hedge funds and other investors in digital assets, according to the SEC’s complaint.

The SEC alleges Manor, co-founder of defunct Portus Alternative Asset Management, “darkened his hair, grew a beard, and used aliases to hide his identity,” in an effort to conceal the fact that he had served a year in prison after pleading guilty to criminal charges arising from the collapse of the Canadian hedge fund.

According to the SEC’s 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,” the SEC said in a news release.

“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, in a statement. “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 US$30 million from investors’ pockets.”

In a parallel action, the U.S. Attorney’s Office for the District of New Jersey announced criminal charges against Manor, a dual citizen of Canada and Israel, and Pardo, an Israeli citizen.

The SEC’s complaint, filed in federal court in New Jersey, charges Manor and Pardo with violating the antifraud and securities registration provisions of the federal securities laws and seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief. The U.S. regulator also seeks orders barring Manor and Pardo from acting as officers or directors of public companies and from participating in future securities offerings.

The investigation is continuing, the SEC said, adding it appreciates the assistance received from several other agencies, including the Ontario Securities Commission.