FINRA Charges Massachusetts Broker For Fraud And Illegal Securities Sale
In an apparent first, the United States Financial Industry Regulatory Authority (FINRA) has filed charges against a Massachusetts resident for securities fraud.
In an apparent first, the United States Financial Industry Regulatory Authority (FINRA) has filed charges against a Massachusetts broker for securities fraud.
FINRA charges crypto broker with securities fraud
FINRA has filed a complaint against Massachusetts resident Timothy Tilton Ayre, accusing him of securities fraud for unlawful distribution of unregistered cryptocurrency security token known as HempCoin.
The complaint filed against Ayre is the first action taken by a self-regulatory organization against an individual involved in the cryptocurrency industry.
This also marks the first time FINRA, the non-profit self-regulatory organization for public brokerage firms in the United States, would be directly engaged in a dispute relating to the cryptocurrency industry.
FINRA’s complaint against Timothy Tilton Ayre
HempCoin token represents an investment in the company of Ayre, Rocky Mountain Ayre (RMTN), but FINRA alleges that the company, and thus the coin, is worthless.
According to the complaint, Ayre purchased the rights to HempCoin in June of 2015. He went on to rebrand the coin as an RMNT-backed security.
Ayre further advertised the cryptocurrency as “the first minable coin backed by marketable securities” during his token sale. Ayre also reportedly guaranteed that each token represented 0.10 shares in RMTN.
Ayre had promoted HempCoin as “the world’s first currency to represent equity ownership” and “the first minable coin backed by marketable securities” in a public company.
Sale of unregistered securities
FINRA is charging Ayre with the unlawful distribution of an unregistered security since Ayre never registered HempCoin with the Securities and Exchange Commission of the U.S.
FINRA noted that Ayre mined more over 81 million HempCoin securities in late 2017 and proceeded to sell them on crypto exchanges.
FINRA wrote in its statement:
“In addition, FINRA alleges that, from January 2013 through October 2016, Ayre defrauded investors in RMTN by making materially false statements and omissions regarding the nature of RMTN’s business, failing to disclose his creation and unlawful distribution of HempCoin, and making multiple false and misleading statements in RMTN’s financial statements,”
In the statement, FINRA further explained that the filing does not constitute legal action; instead, it should be interpreted as “an initiation of a formal proceeding,” Ayre can respond to the filing by requesting a formal disciplinary hearing.
If Ayre’s fails to argue his case and is found guilty, he could be fined, suspended or barred from the securities industry; relieved of his gains; and/or forced to pay reparations to investors.
Regulators and cryptocurrencies
FINRA’s complaint was filed on Tuesday, September 11, 2018, the same day as its ruling organization SEC has issued two separate cease-and-desist orders along with fines.
The Securities and Exchange Commission filed a cease-and-desist against Timothy Enneking and his Crypto Asset Management fund, which “misrepresented” itself as the “first regulated crypto asset fund in the United States.”
The second notice from the SEC addresses “ICO superstore” TokenLot, which the U.S. regulatory organization alleges has also breached securities laws by failing to register in the country.