The Securities and Exchange Commission (SEC) recently filed settled charges against Vy Pham, a Vietnamese citizen living in California, for the unregistered offer and sale and manipulation of two crypto securities tokens, Saitama Inu and Robo Inu.
The SEC’s complaint, filed in the U. S. District Court for the District of Massachusetts, alleges among other claims, violations of Sections 5(a), 5(c) (which requires a security to be registered before it is offered for sale through interstate commerce), 17(a)(1), and 17(a)(3) of the Securities Act of 1933 (which prohibits fraud and misrepresentations in schemes and transactions in the sale or offer of securities) and Sections 9(a)(2) of the Securities Exchange Act of 1934 (which prohibits the artificial inflation or deflation of the price of a security through deceptive or manipulative trading practices, i.e., market manipulation).
According to the SEC’s complaint, Pham allegedly acted in concert with other market manipulators to execute coordinated purchases amongst themselves designed to artificially create volume and lure in new investors by creating the illusion of growing market interest in Saitama Inu. The SEC further contended in its enforcement action that after that group fell apart, Pham allegedly promoted the Robo Inu crypto asset by hiring Gotbit Consulting LLC to generate artificial trading volume to manipulate the price of the Robo Inu crypto asset, which Pham offered and sold as a security to retail investors in unregistered transactions.
In a bifurcated settlement, and with neither admitting nor denying the SEC’s allegations, Pham consented to, subject to court approval, injunctive relief against future violations of certain provisions of the federal securities laws, a specific conduct based injunction and an officer and director bar. The court will then determine the amount of the financial remedies Pham may have to pay, including disgorgement of allegedly ill-gotten gains, prejudgment interest and a civil penalty.
This case is significant in that the SEC is applying traditional market manipulation claims, which it has historically brought only in the context of equity markets, to the crypto asset space. While the security is different (a token as opposed to a listed stock), the SEC is utilizing the same investigative steps, alleging the same type and nature of manipulative conduct (the creation of artificial volume, for example), charging the same fraud-based violations of the securities laws, and seeking the same financial and non-financial remedies. In other words, the SEC is using its traditional enforcement tools and legal theories to investigate and prosecute what it views as classic market manipulation albeit in the crypto space. Accordingly, I have no doubt that this is only the beginning of the SEC’s foray into this arena, despite any rollback of crypto registration regulations that may come with the next presidential administration.
Charged with a Crypto Asset Manipulation Scheme?
David Chase, Esq. of the Law Firm of David R. Chase, a former SEC prosecutor, is now an SEC defense attorney and represents individuals in SEC crypto and token investigations nationwide. You may contact him toll-free at: 800-760-0912 or e-mail at: david@davidchaselaw.com, and can visit the Firm’s website for more information and content at: www.davidchaselaw.com.
