Many hands choosing cryptocurrency coins from box labeled ICO

U.S. securities regulators are shutting down an initial coin offering (ICO).

The U.S. Securities and Exchange Commission (SEC) brought fraud charges against a pair of firms, Veritaseum Inc. and Veritaseum LLC, and the self-described “financial guru” who operates them, Reggie Middleton, alleging that they sold unregistered securities (VERI tokens) to investors, defrauding investors through “material misrepresentations and omissions.”

The SEC’s complaint, which was filed in federal court in Brooklyn, alleged that the defendants misled investors about the demand for the tokens and a fictitious product, and that they manipulated the tokens’ price on a digital asset trading platform.

The allegations have not been proven.

On Monday, the court issued an emergency freeze order that the SEC said will preserve US$8 million of the US$14.8 million raised by the defendants in selling the digital securities to investors.

“After learning about Middleton’s transfer of funds, we took quick action to prevent the further dissipation of investor assets,” said Marc Berger, director of the SEC’s New York office.

“Whether in digital currency or plain cash, we will act to protect investor assets and to pursue fraud and manipulation in our securities markets.”

The SEC is seeking permanent injunctions, disgorgement, penalties and a ban on offering digital securities against the defendants.