Crypto CEO Pleads Guilty in $21 Million Fraud Scheme

The founder and CEO of Titanium Blockchain Infrastructure admits to using some of the company’s ICO money to pay bills for his Hawaii condominium.

The founder and CEO of Titanium Blockchain Infrastructure Services is facing up to 20 years in prison after pleading guilty to securities fraud for his role in a scheme involving the cryptocurrency investment platform’s initial coin offering that raised about $21 million, federal officials said.

Luring Investors With Big Promises

Michael Alan Stollery, 54, of Reseda, Calif., touted the company as a cryptocurrency investment opportunity, luring investors to purchase “BARs,” the cryptocurrency token or coin offered by the ICO, through a series of false and misleading statements, the U.S. Department of Justice said on July 25.

In order to get investors, officials said, Stollery, who pleaded guilty last week in the Central District of California, admitted to falsifying aspects of the company’s white papers.

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The documents purportedly offered investors and prospective investors an explanation of the cryptocurrency investment offering, including the purpose and technology behind the offering, how the offering was different from other cryptocurrency opportunities, and the prospects for the offering’s profitability. 

“TBIS intends to disrupt the current market leaders in the provisioning and virtualization space,” the company’s white paper said. “Return on Investment (ROI) will be achieved far faster than with traditional cloud-based solutions.”

‘Rife With Frauds and Scammers’

The company claimed that “just as steel changed the building industry forever, Titanium will usher in a new era of network construction.”

Stollery also planted fake client testimonials on TBIS’s website and falsely claimed that he had business relationships with the Federal Reserve and dozens of prominent companies to create a false appearance of legitimacy, officials said. 

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In addition, Stollery admitted he mixed the ICO investors’ money with his own funds and used a portion of the offering’s proceeds for such things as credit card charges and paying bills for his Hawaii condominium.

He is scheduled to be sentenced on Nov. 18. 

The crypto space is rife with frauds and scammers,” said Frank Corva, senior analyst for digital assets at Finder. “You can only hope that when a fraud like Stollery is made an example of, it makes others in the crypto space who have malicious intentions think twice before they try to enact a similar type of scheme.”

Crypto Investigations

Corva noted that “luckily, we don’t see as many token ICOs these days as we did during the 2017 crypto bull run.”

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“Otherwise, it seems like it would be unrealistic and borderline impossible for the SEC to keep up with whether or not every new ICO token is a scam or not,” he said.

The guilty plea is the latest in a series of cryptocurrency investigations.

Last week, a former Coinbase  (COIN) – Get Coinbase Global Inc Report employee and two other men were arrested and charged in what authorities said was the first insider-trading case tied to cryptocurrency.

In addition, the Securities and Exchange Commission is launching a probe into Coinbase to determine if the crypto exchange lists digital assets that should be registered as securities, Bloomberg reported.

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