The Securities and Exchange Commission charged two men for alleged profiting from illegal sales of stock of a company claiming to have a blockchain-related business.
According to the SEC’s complaint
, attorney T.J. Jesky and his law firm’s business affairs manager, Mark F. DeStefano, made approximately $1.4 million by selling shares in UBI Blockchain Internet Ltd. from Dec. 26, 2017 to Jan. 5, 2018. The SEC suspended sales due to concerns about the accuracy of assertions in its SEC filings and unusual and unexplained market activity.
“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,” said Robert A. Cohen, Chief of the SEC Enforcement Division’s Cyber Unit. “This case involved both a trading suspension and people holding restricted shares who attempted to profit from the dramatic price increase with illegal stock sales that violated the registration statement.”
The SEC alleges that Jesky and DeStefano received 72,000 restricted shares of UBI Blockchain stock in October 2017 and were permitted to sell the shares at a fixed price of $3.70 per share under the registration statement. Instead, the complaint alleges that Jesky and DeStefano unlawfully sold the shares at much higher market prices – ranging from $21.12 to $48.40 – when UBI Blockchain’s stock experienced an unusual price spike.
The SEC’s complaint, filed in federal court in New York, charges Jesky and DeStefano with violating the registration provisions of the federal securities laws. Without admitting or denying the allegations in the SEC’s complaint, Jesky and DeStefano agreed to return approximately $1.4 million of allegedly ill-gotten gains, pay $188,682 in penalties, and be subject to permanent injunctions.
The SEC’s investigation, which is ongoing, is being coordinated by the Microcap Fraud Task Force and the Cyber Unit. The SEC worked with the Financial Industry Regulatory Authority, the Mexican Comisión Nacional Bancaria y de Valores, and the Panamanian Superintendencia del Mercado de Valores to investigate this case.
Written by Katrina Arden
Attorney and founder of Blockchain Law Group