Regulators fined a hedge fund manager and two men who ran a website to sell cryptocurrencies in two cases representing a new front in the government's campaign to control the digital asset market.
The settlements announced on Tuesday are the first shares of the Securities and Exchange Commission against a hedge fund and broker involving virtual currencies or digital tokens.
The director of the hedge fund, Crypto Asset Management LP, falsely announced that it was the first regulated fund in the United States focused on cryptographic activities, said the SEC.
In the second case, the broker's website was classified as an "ICO hypermarket" to connect buyers with initial coin offerings, a popular way to raise money from individuals who often violate investor protection laws, according to the SEC.  The SEC said Crypto Asset Management and founder Timothy Enneking illegally sold their hedge fund holdings to US investors. The fund's assets peaked at $ 37 million in December, when the ratings for bitcoin and other cryptocurrencies reached their highest point.
Mr. Enneking, 59, is a pioneer in managing speculative funds investing in cryptocurrencies. He and his company, based in La Jolla, California, agreed to pay $ 200,000 to fix the probe. Crypto Asset Management originally raised $ 3.6 million from 44 US investors, the SEC said.
Mr. Enneking and his company have neither admitted nor denied the allegations. A lawyer from Mr. Enneking and his company did not immediately respond to a message seeking comment.
In the second action, the SEC claimed that the founders of TokenLot, a website that linked buyers with digital assets, broke the law by failing to register as a brokerage company. TokenLot and its founders have agreed to pay more than $ 560,000 in penalties without admitting or denying blame, the SEC said.
Both founders, Lenny Kugel, 28, and Eli Lewitt, 27, have agreed to be excluded from the brokerage industry for at least three years. The SEC's order did not accuse them of fraud, but claimed to have violated the laws that obliged brokers to submit to SEC's oversight and to sell only regulated investments to the public. A lawyer for men declined to comment
A Wall Street Journal investigation found that hundreds of digital coin offerings show fraud indicators, including documents from plagiarized investors, promises of guaranteed returns and missing executive teams or false. This year the SEC has set up a website to spread a fake ICO called "Howeycoin" in an attempt to warn investors about how they can quickly lose their money.
TokenLot was in business from July 2017 to February and has taken orders from more than 6,000 investors, the SEC said. The company executed 2,100 orders for early ICO sales and earned commissions for $ 112,000 for doing so, the regulators said. The company also earned about $ 232,000 from the management of secondary market tokens, said the SEC.
The TokenLot website states that it has been closed "due to the ever-changing regulatory landscape of the cryptocurrency space in our jurisdiction." tokens through the company can request reimbursement of orders.
Write to Dave Michaels to [email protected]