SEC Charges Crypto Project Unicoin Over $100M Token Sale Fraud

The SEC on Tuesday charged crypto project Unicoin and three of its senior executives with running a fraudulent offering that raised more than $100m from thousands of investors.

The complaint names CEO and board chairman Alex Konanykhin, former president and board chairwoman Silvina Moschini and former chief investment officer Alex Dominguez.

It accuses them of making false and misleading statements in sales of rights certificates and common stock from Feb. 2022 to the present.

According to the SEC, the company claimed its Unicoin tokens would be backed by billions of dollars of real estate holdings, when in reality those assets were worth only a small fraction of that amount.

Investigators also allege that Unicoin told investors it had sold more than $3b of certificates. However, total proceeds never exceeded $110m. Additionally, the filings state that the company falsely portrayed its offerings as SEC registered.

The agency’s complaint details how Unicoin used extensive promotional efforts, including ads in major airports, on New York City taxis, on television and across social media channels.

Through these campaigns, more than 5,000 investors were persuaded to buy rights certificates described as safe and profitable “next generation” crypto assets. The SEC says the bulk of those sales were illusory.

Additionally, the SEC alleges that Unicoin and Konanykhin breached federal securities registration rules. Specifically, it claims Konanykhin sold nearly 38m of his own certificates at discounted prices. Furthermore, he targeted investors the company had previously barred to preserve its registration exemption.

Consequently, the regulator is seeking permanent injunctive relief. In addition, it wants disgorgement of ill-gotten gains with prejudgment interest. It is also pursuing civil penalties and officer-and-director bars.

Moreover, the commission’s action names Richard Devlin, the company’s general counsel. It accuses him of negligently repeating similar misstatements in private placement materials. Now, Devlin faces charges alongside the other defendants.

Without admitting or denying the allegations, Devlin consented to a final judgment that imposes permanent injunctive relief and requires him to pay a $37,500 civil penalty.

This enforcement differs from earlier SEC cases against unregistered token sales in that it focuses on rights certificates and fictitious asset backing, rather than direct token offerings.

Past actions, such as those against Telegram and Kik, centred on the lack of registration for token distributions. By contrast, the Unicoin case alleges an elaborate marketing scheme built on false promises of real-world collateral.

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