Earlier this week, the Securities and Exchange Commission (SEC) filed a complaint with the Federal Court in New York seeking to freeze all U.S. assets of Quebec-based cryptocurrency startup PlexCoin, including the personal assets of founders Dominic Lacroix and Sabrina Paradis-Royer. The company’s Canadian assets have already been frozen by Quebec’s regulatory agency, the Autorité des marchés financiers (AMF). While the SEC has issued several warnings about cryptocurrency offerings in the past, and even launched investigations into a few ICOs, this marks the first time that the agency has taken serious action against one.
There’s good reason for the SEC to be skeptical of PlexCoin. The complaint describes Lacroix as a “known recidivist securities law violator in Canada,” noting several prior fraudulent investment schemes and a 2013 guilty plea and conviction. The SEC further claims that Lacroix’s role in the company was obscured in an attempt to keep investors in the dark about the true nature of the operation. According to the SEC, the PlexCoin ICO purportedly raised “$15 million from thousands of investors, including those throughout the United States and in this District—through materially false and misleading statements made by Lacroix individually and through entities Lacroix controls, including by promising investors returns of 1,354% in under 29 days.”
PlexCoin appears to have been an ICO only the loosest possible sense. Tokens were issued on the Ethereum platform, but doesn’t appear to have received support from any of the major cryptocurrency trading platforms. The SEC’s complaint also notes that the money raised during the ICO didn’t go to any technical development — PlexCoin doesn’t even have a technical staff — but instead “were intended to fund Lacroix and Paradis-Royer’s expenses including home decor projects.” The complaint includes several additional criminal allegations, creating a portrait of an pseudo-ICO that had “all of the characteristics of a full-fledged cyber scam.”
It should be noted that PlexCoin’s legitimacy was widely questioned even before the SEC or AMF moved to shutter the project. Discussion of the ICO on popular cryptocurrency message boards was largely skeptical in tone from the very start, with users pointing out the lack of even basic public details about the company as far back as June 2017, two months before the token pre-sale. The AMF filed its first complaint to stop the sale of PlexCoin token in July, and Lacroix was found in contempt of court in October for failing to stop those sales.
Given the prior actions by the AMF and Lacroix’s criminal history, it’s likely that the SEC’s efforts to seize PlexCoin’s will be successful. We’ll update the story as it unfolds.
