The US Securities and Exchange Commission (SEC) has charged Eran Eyal, founder of UnitedData (Shopin), with defrauding investors in an initial coin offering (ICO) that pocketed more than $42 million from hundreds of investors.
From the release:
“As alleged in today’s action, the SEC seeks to hold Eyal and Shopin responsible for scamming innocent investors with false claims about relationships and contracts they had secured in support of a blockchain-based universal shopper profile,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “Retail investors considering an investment in a digital asset that meets the definition of a security must be afforded the same truthful disclosures as in any traditional securities offering.”
The SEC’s complaint alleges that from August 2017 to April 2018, Eyal ran a fraudulent unregistered securities offering by selling Shopin Tokens in an ICO.
Shopin aimed to use the funds from the sales of the Shopin Tokens to create universal shopper profiles, maintained on the blockchain, that would track customer purchase histories across online retailers and recommend products based on this information.
The problem was – Shopin never created a functional platform. Secondly, they lied through their teeth to investors in connection with its offering, including misrepresentations about purported partnerships with certain well-known retailers and about the involvement of a prominent entrepreneur in the digital asset space.
The SEC also alleges that Eyal misappropriated investor funds for his personal use, including at least $500,000 used for rent, shopping, entertainment expenses, and a dating service.
The SEC’s complaint, filed in federal district court in Manhattan, charges Eyal and Shopin with violating the antifraud and registration provisions of the federal securities laws and seeks permanent injunctions, disgorgement with interest, and civil penalties, as well as an officer-and-director bar against Eyal and a bar against Eyal and Shopin prohibiting them from participating in any future offering of digital-asset securities.
The SEC’s investigation was conducted by Jon Daniels and John O. Enright of the Cyber Unit and Bennett Ellenbogen of the New York Regional Office, and the litigation will be conducted by Victor Suthammanont of the New York Regional Office and Messrs. Daniels and Ellenbogen. The case is being supervised by Sanjay Wadhwa, Senior Associate Director of the New York Regional Office. The SEC appreciates the assistance of the New York Attorney General’s Office.