The Securities and Exchange Commission (SEC) of the United States has filed a lawsuit against two crypto advisory firms and their owner for offering securities and raising more than $4 million from investors.
Gabriel Edelman is the owner of both companies, Creative Advancement LLC and Edelman Blockchain Advisors. According to the complaint, the defendants promised to assist these investors in investing in digital assets.
The defendants, however, failed to keep these promises because “only a small portion” of the investors’ funds were invested. Edelman allegedly used the funds from the investors for personal gains, such as paying credit card bills. According to the SEC, Edelman and his companies operated between February 2017 and May 2021.
Edelman’s operations, according to the watchdog, were Ponzi-like because he sent some investors early repayments to induce them to make larger investments. Edelman’s scheme, according to the financial regulator, targeted those with little knowledge of cryptocurrency.
The Commission is now asking the court to halt the operations of these companies. It also wants the court to order the firms to hand over the proceeds of their illegal operations.
The SEC has recently increased its regulatory scrutiny of the crypto space. The Gary Gensler-led commission filed a lawsuit earlier this week against a Chicago-based company that misrepresented its tokens to investors and raised $1.5 million.
Meanwhile, Gensler reiterated his belief that “most crypto assets are securities” during a hearing with US Senators. In a separate press conference, the SEC chairman stated that crypto assets that use staking mechanisms may qualify as securities under the Howey test.
Gensler didn’t mention any cryptocurrency assets that might count as securities. However, Rostin Benham, the chairman of the US Commodity Futures Trading Commission, expressed readiness to serve as the primary regulator of cryptocurrencies.
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