SEC Charges Two in Connection with Illegal Sale of Blockchain-Related Stock

The U.S. Securities and Exchange Commission (SEC) has charged two men with selling stock illegally. The pair allegedly profited to the tune of around $1.4 million by offloading  restricted shares in a blockchain-related company after a sudden price spike late last year.

SEC Warns Investors of Risks Faced When Investing in Blockchain Businesses

According to a press release on the SEC’s website, TJ Jesky and colleague Mark F. DeStefano sold shares in UBI Blockchain Internet Ltd. The sales occurred during a 10-day period starting on December 26, 2017. The selloff was halted after the SEC suspended trading in the company following “unusual and unexplained market activity.”

A statement from the chief of the SEC’s Cyber Unit, Robert A. Cohen read:

“This case is a prime example of why the SEC has warned retail investors to be cautious before buying stock in companies that suddenly claim to have a blockchain business… This case involved both a trading suspension and people holding restricted shares who attempted to profit from the dramatic price increase with illegal stock sales that violated the registration statement.”

The allegation brought by the SEC against Jesky and DeStefano states that the pair received 72,000 restricted shares in UBI Blockchain in October 2017.

At the time, it was established that the Nevada-based pair were allowed to sell this stock at a fixed rate of $3.70 per share. However, the U.S. financial regulators claim that that Jesky and DeStefano illegally offloaded their shares at a much higher price – between $21.12 and $48.40. This was following an unusual spike in the price of the company’s shares.

Such a price spike in the shares of blockchain-related companies was seemingly the norm in late 2017. Here at NewsBTC, we’ve previously reported on similar incidences. Perhaps the most brazen example was that of the beverage company-turned psuedo-blockchain firm Long Blockchain.

They changed their name from Long Island Iced Tea, seemingly to ride the wave of blockchain euphoria. The firm saw their share price skyrocket after the rebrand. However, they were later removed from the Nasdaq stock exchange for failing to keep their market cap above $35 million.

According to the statement by the SEC earlier today, the pair have agreed to return $1.4 million of their ill-gotten gains and an additional $188,682 in penalties. In addition to the financial reparations, Jesky and DeStefano will also be subject to permanent injunctions. This settlement is to be confirmed at a later date in court.

Leading the investigation into the crime is Michael D. Paley, Kevin P. McGrath, Tracy E. Sivitz, John P. Lucas, and Ricky Tong. It will be overseen by Lara S. Mehraban, as well as Robert A. Cohen. Financial regulators of both Mexico and Panama are also assisting in the SEC investigation.