The US Securities and Exchange Commission (SEC) has accused Canada-based Cryptobontix, Bermuda-based Arbitrade Ltd, and principals for perpetrating a pump-and-dump involving “Dignity” or “DIG,” a crypto asset, CoinDesk reported.
What are pump-and-dump schemes?
This is a scheme where holders or backers of a low-value coin or token market and promote it to convince people to buy it, artificially hiking up demand.
When the price increases, the people behind the project sell, take profit, and disappear. The price drops and later investors are left holding the bag.
Companies lied about acquiring $10 billion in gold
The filing states that the two companies lied Arbitrade had acquired and received ownership of gold bullion worth $10 billion between May 2018 and January 2019. Moreover, they announced that each DIG token issued and bought by an investor had $1 backing in gold.
A ruse
The gold acquisition was a lie to increase demand for DIG. The firm’s principals were able to sell around $37 million of DIG at inflated prices. US investors were among the victims.
The defendants have been charged with violating the securities registration and antifraud provisions of the federal securities legislation.
The filing seeks disgorgement, prejudgment interest, permanent injunctive relief, and civil penalties against the defendants.
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