An Offering Fraud of Crypto and Dollars
Crypto is one of the key items that the Commission is examining. The question is what additional regulation is necessary to provide better disclosure and protection – a key question addressed by Chair Gensler in his Congressional testimony on Tuesday.
As the regulators consider, the market evolves. The Commission’s latest offering fraud action is actually a two for one combo – a combination of the typical stock offering with a crypto offering. The case resolved with huge investor losses and big penalties for the Respondents. In the Matter of GTV Media Group, Inc., Adm. Proc. File No. 3-2037 (September 13, 2021).
The proceeding names as respondents GTV, its parent Saraca Media Group, Inc. (together with GTV the “G Entities”) and Voice of Guo Media, Inc. From April 2020 through June 2020 thousands of individuals were solicited to invest in GTV common stock. The G entities worked during the same period to solicit individuals to invest in G-Coins. The proceeds from the two offerings were commingled. About $487 million was raised by 5,000 investors.
The memorandum for the stock offering claimed it would be the first ever platform which will combine citizen journalism and social news with state-of-the-art technology. It planned to be an uncensored bridge between China and the Western world.
Information for the two offerings was disseminated through videos, websites and social media platforms. The Coin Offering was touted as an investment opportunity with the likelihood of significant returns based on the ability of the G Entities to develop an online platform through which investors would be able to engage in transactions using either G-Coins or G Dollars. The Order alleges violations of Securities Act Sections 5(a) and 5(c).
To resolve the matter Respondents each consented to a cease-and-desist order based on the Sections cited in the Order. GTV and Saraca will jointly and severally pay disgorgement of $434,134,141, prejudgment interest of $15,776,488. Respondent BTV will pay a penalty of $15,000,000. Respondent Saraca will also pay a penalty of $15,000,000.