American authorities have frozen the assets of two Quebecers who allegedly were involved in a virtual currency scam that raised $15 million from investors by falsely promising a 13-fold profit in less than a month.
The U.S. Securities and Exchange Commission obtained an emergency court order Monday as a complaint was filed in Brooklyn, N.Y., against Dominic Lacroix, 35, his company PlexCorps and his partner, Sabrina Paradis-Royer, 26.
"Lacroix and Paradis-Royer misappropriated investor funds and engaged in other deceptive acts relating to investments in the PlexCoin token," the filing reads.
The alleged activities began this past August.
This week's developments come amid a separate inquiry in Quebec, where a spokesman for the province's securities regulator says more than $10 million was invested over the same time frame.
"We are very scared about what could happen for these investors (and) that's why we're inviting them to stop investing in that company," Autorite des marches financiers spokesman Sylvain Theberge said Tuesday.
Attempts to reach PlexCorps or Lacroix through a lawyer were unsuccessful.
According to U.S. documents, the millions were gathered "through materially false and misleading statements made by Lacroix individually and through entities Lacroix controls."
The U.S. securities commission described Lacroix as a recidivist violator of Quebec securities laws. It alleges he and PlexCorps marketed and sold securities dubbed PlexCoin through the internet to investors in the United States and abroad without registering with U.S. authorities or disclosing his past infractions.
The Quebec company falsely claimed to operate from Singapore with a staff of experts worldwide and promised what the U.S. securities commission called "outlandish rewards" of 1,354 per cent profit in less than 29 days.
In fact, authorities allege the investments raised actually funded Lacroix and Paradis-Royer's expenses, including home decor projects.
The U.S. court filing said the investment pushed ahead despite Quebec's securities regulator obtaining an injunction to stop the initial coin offering in July. The injunction ordered a halt to all solicitation and the removal of all advertisements and websites pertaining to PlexCoin.
A Quebec judge found Lacroix guilty of contempt of court in October for defying the injunction.
The Quebec securities regulator put consumers on guard in a statement about "the major risks that could stem from responding to this invitation to invest," when it became clear the orders wouldn't be respected.
Another injunction calling for an end to activities was issued in September by the Quebec tribunal, this time naming Paradis-Royer, described as Lacroix's romantic partner.
"Paradis-Royer did her part to help Lacroix conceal his identity and both of their involvements with the fraudulent PlexCoin ICO," the filing reads.
The Quebec regulator assisted U.S. authorities with their case.
The U.S. securities commission alleges that Lacroix tried to pass off PlexCoin tokens as a so-called cryptocurrency like Bitcoin, but U.S. laws see them as securities and not digital assets.
The U.S. complaint charges the couple and PlexCorps with violation of anti-fraud provisions of American federal securities law, and Lacroix and the company with violating rules that required him to register.
It is seeking permanent injunctions as well as the surrendering of illegal profits plus interest and other penalties. Authorities also want the Quebec City couple barred from trading in securities.
According to a statement, the charges against the pair mark a first for the U.S. regulator since it established its new cyber unit in September.
"This first cyber unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing," said Robert Cohen, chief of the unit.
In November, a lawyer for the Quebec regulator recommended six months behind bars and a fine for Lacroix and his company. His lawyer countered with a fine and judge has yet to decide on a sentence.
Since 2011, Lacroix has been subject of previous orders by the Quebec financial markets tribunal for violations of the act and has pleaded guilty to security fraud.