FINRA Takes Down HempCoin Cryptocurrency for Selling Unregistered Securities
The Financial Industry Regulatory Authority (FINRA) has issued its first cryptocurrency-related disciplinary action, charging Timothy Tilton Ayre, a broker in Agawam, MA., with securities fraud and the unlawful distribution of HempCoin, which the agency claims is an unregistered cryptocurrency security.
FINFRA, a not-for-profit organization overseen by the SEC to author rules and enforce compliance of federal securities laws, has accused Ayre of trying to entice people to invest in Rocky Mountain Ayre Inc. (RMTN) through the purchase of HempCoin, which Ayre claimed was “the first minable coin backed by marketable securities,” from Jan. 2013 to Oct. 2016, according to the complaint.
The agency claims Ayre made fraudulent statements about the finances of RMTN, which was traded over the counter and quoted on OTC Markets group’s Pink Market.
FINFRA further claims that, in June 2015, Ayre purchased the coin’s rights and repackaged it as a security that was backed by RMTN as a common stock. He referenced HempCoin as “the world’s first currency to represent equity ownership” in a publicly traded company, FINFRA claims, assuring investors that each coin was worth the equivalent of 0.10 shares of RMTN common stock.
Through late 2017, investors mined in excess of 81 million HempCoin security tokens, buying and selling them on two crypto exchanges, the complaint claims. In addition, Ayre never registered HempCoin nor applied for a registration exemption.
Investors Allegedly Defrauded
Ayre also defrauded investors by giving false information and omissions concerning RMTN from Jan. 2013 through Oct. 2016, according to FINRA. He neglected to disclose the illegal distribution of HempCoin and his creation of the asset, and also gave numerous misleading and false representations in the company’s financial statements, the complaint states.
The complaint initiates FINFRA proceedings for which findings have yet to be determined. The complaint does not constitute any decision concerning the allegations. The party named in the complaint is entitled to request a hearing in front of a FINFRA disciplinary panel. Remedies can include a suspension or bar from the securities trade, a censure, a fine, or a surrender of gains related to the violation.