Risk & Compliance

SEC Freezes Accounts of Digital Token Promoter

Regulators said Reginald Middleton and his firm Veritaseum failed to register and fraudulently sold ‘VERI’ tokens.
Lauren MuskettAugust 14, 2019
SEC Freezes Accounts of Digital Token Promoter

The Securities and Exchange Commission announced fraud charges against Reginald Middleton, a self-described “financial guru,” and two entities he controls, Veritaseum LLC and Veritaseum Inc., alleging they were part of a scheme to sell digital securities to investors and to manipulate the market for those securities.

According to the SEC, Middleton sold securities called “VERI” tokens on the internet and induced retail investors to buy them by making multiple material misrepresentations and omissions.

Regulators said Middleton moved significant investor assets, transferring some of them to his personal account. They asked a court to enter an emergency freeze to preserve at least $8 million of the $14.8 million the defendants raised.

“After learning about Middleton’s transfer of funds, we took quick action to prevent the further dissipation of investor assets,” Marc Berger, the director of the SEC’s New York Regional Office, said in a statement.  “Whether in digital currency or plain cash, we will act to protect investor assets and to pursue fraud and manipulation in our securities markets.”

The asset freeze order covers accounts at traditional financial institutions, cryptocurrency exchanges, and 15 addresses on the Ethereum blockchain.

The SEC also alleged Middleton and the Veritaseum entities, knowingly misled investors about their prior business venture and the use of offering proceeds, as well as touting fictitious investor demand. Regulators said Middleton failed to register the VERI ICO with the SEC and claimed the coins were not securities, but investments in a technology platform or his personal brand. He then manipulated the price of the VERI tokens trading on an unregistered digital asset platform.

The case, filed in federal court in Brooklyn, is ongoing.

The investigation was conducted by Jorge Tenreiro and Victor Suthammanont of the New York Regional Office with assistance from the SEC’s cyber unit and IT forensics staff. The case is being supervised by Lara Shalov Mehraban, associate regional director of the New York Regional Office.

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