UPDATED | July 10, 2018:
On July 9, the Southern District Court of New York approved a settlement with both of the accused. The settlement requires T.J. Jesky and Mark DeStefano to give back approximately $1.4 million dollars in allegedly ill-gotten gains, pay $188,682 in civil penalties, and be subject to undisclosed permanent injunctions. The two have not admitted nor denied their guilt.
ORIGINAL | July 3, 2018:
Two Nevada residents have been charged with profiting from the illegal sale of stocks in a suspicious company that claimed to be blockchain-related.
According to a July 2 press release from the Securities and Exchange Commission (SEC), attorney T.J. Jesky and business affairs manager Mark DeStefano made about $1.4 million in ten days through illegally selling stock in a Hong Kong-based company called UBI Blockchain Internet Ltd. The commission placed a temporary halt on the trading of UBI Blockchain stock in January over concerns about the "accuracy of assertions in its SEC filings and unusual and unexplained market activity."
Universal Blockchain Internet's website says the company is made up of "blockchain security experts that protect your health" and focuses on "blockchain technology, the internet of things (IoT), the stock market, and biomedical technology" to improve the safety and quality of food and drugs.
The SEC alleges that Jesky and DeStefano received 72,000 restricted shares of UBI Blockchain stock in October 2017 and were only allowed to sell them at a fixed rate of $3.70 per share, but the two became greedy when the price of UBI stock peaked. They are accused of illegally selling the shares at prices ranging from $21.12 to $48.40 between December 26 and January 5.
Robert A. Cohen, chief of the SEC Enforcement Division's Cyber Unit, warned:
"This case is a prime example of why the SEC has warned retail investors to be cautious before buying stock in companies that suddenly claim to have a blockchain business."
Neither Jesky nor DeStefano have admitted guilt, but they have agreed to a settlement which requires them to pay back the $1.4 million, as well as $188,682 in penalties, and they will be subject to future permanent injunctions. The settlement has yet to be approved by the court.
The SEC has been very active in investigating blockchain and cryptocurrency companies. In February, ETHNews reported that the SEC temporarily suspended over-the-counter trade of three other businesses that claimed to have ties to crypto. Later that same month, it was reported that the SEC was bringing charges against John Montroll, the owner of an "an unregistered bitcoin-denominated securities exchange."