
SEC Emergency Action Halts PlexCoin ICO - Permit
https://www.sec.gov/news/press-release/2017-219
======
donquichotte
> [The SEC] obtained an emergency asset freeze to halt a fast-moving Initial
> Coin Offering (ICO) fraud that raised up to $15 million from thousands of
> investors since August by falsely promising a 13-fold profit in less than a
> month.

To me, the PlexCoin homepage [1] is indistinguishable from all the other ICO
homepages I've seen.

\- bootstrap homepage: check

\- beautiful graphics with actors and coins: check

\- unclear statement what the company is or will do: check

[1] [https://www.plexcoin.com/](https://www.plexcoin.com/)

~~~
resonanttoe
I tend to agree. Every ICO page mainly struggles with number 3. I never get
what they are selling, probably because they're not selling anything other
than the idea of buying in to their ICO.

Let's take a (somewhat snarky and definitely superficial) look at a few of the
"top gainers" & market cap from [https://coinmarketcap.com/gainers-
losers/](https://coinmarketcap.com/gainers-losers/) (as of Dec 2nd)

Gainers:

1\. Petrodollar.. Website isn't even an owned domain.

2\. BTCMoon - Well their website works, but it speaks just heavily of the
token offering not what it does. Personally I like the first question in the
FAQ: "Q: Why BTCMoon are there? " Which is as close to the pseudo-
philosophical question of "why is the moon" as we can get.

3.iQuant - Nearest I can tell, a blockchain trading platform. They're the
closest to actually telling me something, but their ICO ended so maybe thats
why.

Market cap.

1\. EOS - Just talks about the ICO offering over and over. No idea

2\. OmiseGo - "OmiseGO is a public Ethereum-based financial technology for use
in mainstream digital wallets, that enables real-time, peer-to-peer ...." I'm
sorry we've reached our buzzword quota for the day.

3\. Tether.. Well we'll leave that one where it lands.

Ok so its super snarky and highly superficial, but in all cases, the basic
question of "What are you selling" isn't answered clearly and concisely. I
just don't get it but if the requirement is either;

A. Drink the ICO cool-aid and you'll get it

B. "You have to think beyond how they'll sell to consumers, these are like
platforms with boundless potential"

Then I don't want to get it, because ambiguity is definitely something
investors should avoid.

~~~
verroq
Tether is not an ICO and quite clear what it does. It is supposed to be a
token that pegged to USD to facilitate the moving of USD via the blockchain
instead of having to bother with the pain and fees of banks.

Its market cap rises as more USD is deposited into their banks.

~~~
alwaysnotright
Sadly there is a lot of red flags indicating that this is not the case, they
haven't had banking since April so there are no way to deposit funds to them
for regular users at least.

Also, one employee from Bitfinex suggested on reddit that Tether is funded by
crypto deposit to them and not USD...

~~~
nickfromseattle
The tether scandal is highly concerning. Essentially Bitfinex and Tether are
owned by the same people, the Tethers issued do not appear to be backed by
USD, and there are almost a billion tethers issued - which many believe is
responsible for the increase in BitCoin.

They've claimed they are ready to release audit details for 2+ years (no
audit), and the founding team has also gone on the record about wash trading
and other fraudulent financial activity.

Additionally, Bitfinex had some 'flash crashes' that wiped out people's margin
accounts. Some believe the flash crash was caused by Bitfinex themselves on
purpose to accomplish this exact goal.

Stay up to date at
[https://www.twitter.com/bitfinxed](https://www.twitter.com/bitfinxed) &
[https://reddit.com/r/bitfinex](https://reddit.com/r/bitfinex)

------
Animats
This is a typical SEC action against a get-rich-quick Ponzi-type scheme. Read
the SEC's note on Ponzi schemes.[1] The original Charles Ponzi only promised a
50% return in 90 days. Bernie Madoff promised about 10-15% a year. This "ICO"
promised 1300% in 30 days.

[1] [https://www.sec.gov/fast-
answers/answersponzihtm.html](https://www.sec.gov/fast-
answers/answersponzihtm.html)

~~~
brudgers
If you can get in early _and_ you recognize it for what it is, a Ponzi scheme
can be just another rational investment.

Madoff's clients made good returns for a long time. From the perspective of
each long term individual investor, the problem was that they did not fold and
walk away from the table with their winnings after a few years. The scheme
would have survived a few of those, and maybe some investors did.

None of which is to imply that I think Ponzi schemes should be legal. I'm not
a libertarian.

~~~
Animats
Only if they actually pay out withdrawals.

~~~
brudgers
True any time you hand over a pile of money with the expectation that the
recipient will give you more back.

------
hectorr1
Good. The first step to establishing a regulatory framework is defining
boundaries of acceptable behavior by shutting down egregious violations.

~~~
libertymcateer
What about the folks who love cryptocurrency specifically because of the fact
it is unregulated? Are we not doing that anymore?

~~~
fragsworth
"Regulation" isn't a one-dimensional thing.

You can simultaneously hate scam ICOs and still not want most other aspects of
cryptocurrencies to be regulated. There are lots of different regulations that
different people find acceptable.

~~~
libertymcateer
I agree - I'm an attorney. But are we picking and choosing here? Because my
bet is, and has been for quite sometime, that when all is said and done, the
'regulations' we are talking about are those that already exist and are
applied to securities.

~~~
quirkot
Yes, we are picking and choosing. We’re picking out individuals that are
motivated to love unregulated financial instruments because it’s easier to
defraud the populace and choosing to shut them down

------
hamstercat
The AMF had already found him guilty of the same and barred him from
soliciting, directly or indirectly, investors for PlexCoin [0]. It's not the
first time he gets in trouble, he had a lending "company" that was
investigated and was barred from participating anymore [1]. All links in
French sorry.

[0]: [https://lautorite.qc.ca/grand-public/salle-de-
presse/actuali...](https://lautorite.qc.ca/grand-public/salle-de-
presse/actualite/fiche-dactualite/dossier-plexcoin-dominic-lacroix-et-dl-
innov-inc-coupables-doutrage-au-tribunal/) [1]:
[https://lautorite.qc.ca/grand-public/salle-de-
presse/actuali...](https://lautorite.qc.ca/grand-public/salle-de-
presse/actualite/fiche-dactualite/dominic-lacroix-regis-roberge-dl-innov-inc-
micro-prets-inc-et-gap-transit-inc-sont-vises-par-pl/)

~~~
ShroudedNight
This appears to be an English version of [1]:
[https://lautorite.qc.ca/en/general-public/media-
centre/news/...](https://lautorite.qc.ca/en/general-public/media-
centre/news/fiche-dactualites/orders-issued-against-dominic-lacroix-regis-
roberge-dl-innov-inc-micro-prets-inc-and-gap-transi/)

------
modeless
People might not be so eager to dump money into these scam investments if the
government hadn't strangled legal and regulated equity crowdfunding. The SEC
needs to look at ways to allow people to invest in legitimate opportunities,
not just shut down scams. The JOBS act has been a bust in this regard as far
as I can see.

~~~
cwperkins
There's pretty sound reasons why non-accredited investors can only invest in
public tradable assets. Accredited investors can get into non-public companies
if they earn a high enough income such that they can take that kind of
volatility. For students fresh out of college that should focus on saving, it
is not a great idea to throw those savings into non-public startups. It sure
sounds tempting, but many times over has been shown to be the most risky asset
class.

~~~
cableshaft
People should be allowed to make risky investments if they want, especially if
they keep that risk to a small percentage of their portfolio. Besides, the
lotto and casinos exist and are still allowed in most places, which is
basically what you're leaving these people to do (and what I've seen many
younger people waste their money instead).

Isn't it this very website where people over and over again say that the best
time to take a risk is when you're young, anyway, and don't have any
responsibilities?

There's a difference between risky investments and outright scams, though, and
I'm fine if the government steps in and stops the scams, although I worry that
they'll start seeing every single ICO as a scam and want to stop all of them
(to be fair, it almost seems like they all are right now to me as well).

That's one of the nice things about the rise of cryptocurrencies, actually, is
it's allowed younger people to make bets that have wildly paid off for them,
that would otherwise not been available to them. It was risky as hell for
sure, but for those people that only put in what they could afford to lose,
it's outperformed every other investment by many many times this past year.

~~~
vkou
People can already make a risky investment, by just buying public stock on the
public markets.

~~~
aeorgnoieang
So there's no reason why they shouldn't be able to make other risky
investments, right?

~~~
vkou
Public companies have strict auditing rules, and other controls that prevent
insiders, or a small group of people colluding with insiders from ripping off
other investors.

This is not the case with private firms, and doubly-so for ICOs.

There's risky investments, and there's walking around the bad part of town
after dark, wearing a blindfold, with two wallets in each hand, hoping you'll
find a winning lottery ticket on the ground.

------
gregdoesit
Plexcoin, summarized:

>"Security is very important to us. That's why we invented a new type of
encryption system based on your private virtual currency address, so it is
unencyptable."

Come up with a new encryption system and tell the world it's unencryptable...
I'll just leave this one hanging. Source: Plexcoin blog
([https://www.plexcoin.com/blog/important-
statement](https://www.plexcoin.com/blog/important-statement))

~~~
gitgud
Well, it says "undecryptable" now...

".... based on your private virtual currency address, so it is undecryptable."

But that makes me think it cannot be decrypted, which is pretty bad for an
encryption system. If you cannot decrypt the data, it might as well be random
noise ...

~~~
yebyen
Even if this statement is pristine, it's still pretty flagrant:

> August 10, 13h00 GMT

> We implement a unique encryption system that uses a portion of your private
> PlexCoin address to encrypt your email address, your password and your
> wallet. Security is very important to us. That's why we invented a new type
> of encryption system based on your private virtual currency address, so it
> is undecryptable.

I mean, even in context, what does this mean? "Security is very important to
us."

------
toomanybeersies
We had a similar thing happen a week or so ago in New Zealand, with the
Financial Markets Authority warning against an ICO:
[http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&o...](http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11947186)

The ICO was later withdrawn:
[http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&o...](http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11948672)

Basic rundown: 19 year old "serial entrepreneur" buys a Carosell [0] (similar
to craigslist) clone script for a couple of grand (apparently he claimed to
have made it himself), claims to have millions of users after a couple of
months, and then tries to launch an ICO. It was a blatant scam, he was called
out for it, and ended up cancelling the ICO, and promising to return all the
money.

[0]
[https://en.wikipedia.org/wiki/Carousell_(company)](https://en.wikipedia.org/wiki/Carousell_\(company\))

------
NelsonMinar
It's worth noting the SEC describes the perpetrator as "a recidivist Quebec
securities law violator". Apparently this isn't the first scam he's run.

~~~
joering2
Did not know SEC has jurisdiction over Canada, thanks.

~~~
Kalium
They're not claiming it. They're noting that the person in question has a
history of securities law violations.

------
KasianFranks
This is really good to see. Separating the scam ICOs from the non-scam ICOs is
only going to become more important in the future.

~~~
root_axis
I can't envision a future where they are anything but a scam. The tokens have
no legal or economic connection to any business activity produced by the token
creators so I don't see why any ICO token would be worth any more than any
other besides hype.

~~~
pavel_lishin
They seem like Kickstarter bred with stocks - mostly an unenforceable promise
of future products/services/magic to the users who buy the initial coins.

An employee where I work recommended we do our own ICO, but for the life of
me, I couldn't figure out what it was that the coins would eventually be
exchanged for. Maybe I'm just too dumb - he's objectively smarter than me,
I'll freely admit - but it seemed not too different from shaking a cup to
passersby.

~~~
root_axis
Yeah, being very smart doesn't seem to be an effective inoculant against
blockchain hysteria. Then again, the ICO scammers are making millions and I'm
not, so, maybe I'm getting ahead of myself.

------
finkin1
> PlexCorps marketed and sold securities called PlexCoin on the internet to
> investors in the U.S. and elsewhere, claiming that investments in PlexCoin
> would yield a 1,354 percent profit in less than 29 days.

Is this claim the crux of the securities violation?

~~~
quirkot
It's effectively putting knowingly false information in your prospectus. I
think that it is the crux, but IANAL

~~~
finkin1
Right, I get that, but it seems like that statement is the only reason the SEC
is halting the ICO. Seems like an incredibly idiotic statement to be making
when selling a security. Would the ICO have gone off fine if they hadn't made
such a ridiculous statement? I guess it could be argued without such a
statement they wouldn't have raised as much money, but my guess is that they
could had just hedged the statement to comply with securities laws. Seems like
an incredibly dumb oversight, and anyone who knows about securities would have
been able to see how dumb and risky making a statement like that is.

~~~
philipwhiuk
If you're making your first steps to regulate an industry you start with the
low hanging fruit.

------
willsr
From their FAQ:

"Is it safe? The cryptocurrency is currently the safest currency. Unlike cash,
you cannot lose it or have it robbed. No bank will be able to validate your
transactions or to take fees on your transactions. It's your money and no one
will be able to scrutinize your operations."

People bought this?

------
hectorr1
For those interested in a little light reading on the subject of Securities
Law and Crypto Assets:

[https://coincenter.org/entry/framework-for-securities-
regula...](https://coincenter.org/entry/framework-for-securities-regulation-
of-cryptocurrencies)

[https://coincenter.org/entry/a-securities-law-framework-
for-...](https://coincenter.org/entry/a-securities-law-framework-for-
blockchain-tokens)

------
gruez
if the company's in quebec, how were they able to freeze their assets? did the
company have exchange accounts in US? does the SEC have some sort of agreement
with the canadians?

~~~
Flott
I don't know for sure. All I know is that the AMF (Autorité des Marchés
Financiers, Quebec "equivalent" of the SEC) froze Dominic Lacroix assets on
Jun 13 2017[0]. Yet, his employees were still getting paid and he launched
Plexcoin even if a court order was forbidding him to do so.

Maybe the AMF had information about accounts in USA and tipped the SEC?

[0] [https://lautorite.qc.ca/en/general-public/media-
centre/news/...](https://lautorite.qc.ca/en/general-public/media-
centre/news/fiche-dactualites/dominic-lacroix-regis-roberge-dl-innov-inc-
micro-prets-inc-et-gap-transit-inc-sont-vises-par-pl/)

EDIT:

More information: The court order preventing him to launch Plexcoin was issued
on July 20[1]. He did not comply­ and was charged for court contempt in
September. The court found him guilty on oct 17 2017[2].

[1] [https://lautorite.qc.ca/en/general-public/media-
centre/news/...](https://lautorite.qc.ca/en/general-public/media-
centre/news/fiche-dactualites/monnaie-virtuelle-plexcorps-plexcoin-dl-innov-
inc-gestio-inc-et-dominic-lacroix-sont-vises-pa/)

[2] French only - [https://lautorite.qc.ca/grand-public/salle-de-
presse/actuali...](https://lautorite.qc.ca/grand-public/salle-de-
presse/actualite/fiche-dactualite/dossier-plexcoin-dominic-lacroix-et-dl-
innov-inc-coupables-doutrage-au-tribunal/)

------
spondyl
I'd be fascinated to see a documentary that followed the launch of an ICO just
to see what sort of headspace they're in.

~~~
shepardrtc
Scam artists have been around since we developed intelligence. These ones are
just a little more high-tech.

------
wallacoloo
So what actions did the SEC actually take? It's an Ethereum token, right? So
even if the SEC froze the creator's assets, they can't prevent others from
still trading the token. They haven't completely closed the on-ramps for the
token, then, since new "investors" can still purchase them in exchange for
some other token. I guess they've just halted the creation of new tokens and
the advertisement of the token by its creator?

So what happens to all the existing investors? Does the SEC (or another
entity) buy back their tokens with the seized funds? Clearly, I haven't dealt
with ICOs before, nor do I understand much of how the SEC operates.

------
Klathmon
It might be useful to change the title to

"SEC Emergency Action Halts an ICO Scam"

Just clarifying that the emergency action is halting a single scam ICO and not
halting all ICOs.

For clarity, the original title (and the title of the linked article) was "SEC
Emergency Action Halts ICO Scam"

~~~
Permit
I've updated the title to try to be a little clearer on that point. (It
confused me as well when I first saw it)

------
jeffdo
Website redirects me to this url:
[https://cdn01.plexcoin.com/403.html](https://cdn01.plexcoin.com/403.html)

Sketchy to say the least.

------
crooked-v
"PlexCoin" also seems like a name likely to run into trademark issues with the
makers of the media management/DVR software Plex (plex.tv).

~~~
stale2002
That's not really how trademark works.

It is only similar/same industries where that applies.

The rule of thumb is consumer confusion. Is an average person going to mix up
the 2?

In this case, the answer is likely No.

~~~
pessimizer
> Is an _average person_ going to mix up the 2?

Isn't the standard "a moron in a hurry"?

------
nikolay
All ICOs should be banned! When you see all these scams around, you start
appreciating regulation, law, and order more! I am not sure why so many
engineers today are into anarchy when it's entirely against the basis of
computer science and engineering in general! I get the idea about the
distributed systems for higher resilience, but going against the merits of
states and governments is just childish!

~~~
tuxxy
Banning ICOs would, quite literally, be impossible.

~~~
nikolay
It's impossible to ban narcotics as well, but they are still persecuted.

~~~
jsloss
And look how well that works. Another great example of bad outcomes from over
regulation.

------
Frogolocalypse
This is going to happen a lot methinks.

------
im3w1l
So iiuc, the problem was that they promised a given profit in a given
timeframe?

------
joering2
Okay so I will play the Devils advocate here. They have good intentions and
basically shrug off bad publicity and continue with their project. Then SEC
step in shutting them down and bankrupting them before even charges were
filled or they had their chance to defend themselves. Now moving forward
months/years later they lack of funds or bad publicity made it they are forced
to go down. So yeah in such scenario public and SEC will always be correct it
was a scam :) every single time - just cut off founders hands, throw a fine,
maybe jail time. Im sure its hard to meet potential business partners, make
presentations or sales, when you behind bars.

~~~
philipwhiuk
The guy's already facing contempt of court charges in Canada. This is more
preventing people running with the money.

