The SEC has gone after another fraudulent ICO. According to a lawsuit filed by the SEC, the sale of the Dropil ICO was fraudulent. The ICO took place in 2018 and Dropil managed to raise $1.8 million.
THE SEC is going after Dropil
According to a press release, the SEC is pursuing Dropil, Inc, and its three founders Zachary Matar, Jeremy McAlpine, and Patrick O’Hara. The lawsuit was filed in a federal court in California. They are accused of defrauding investors and holding an unregistered securities sale.
The SEC alleges that Dropil sold DROP Tokens between January 2018 and March 2018 and managed to get over $1.8 million from unwitting investors. According to the SEC, the Dropil founders lied to investors that their funds would go into a collective pool and be traded via Dex, a trading bot. Their funds would be combined and used for trading in various cryptocurrencies with the help of the algorithm that would be developed by Dropil.
None of It Was True
The SEC said that the story the Dropil founders sold to their investors was false. It alleges that while Dropil had promised investors would receive profits every 15 days, the funds were not invested. Instead, they were sent to personal bank accounts and used for other things. To keep things hidden, the company came up with false reporting statements while they continued to pay investors who invested in the Dex bot using the DROP tokens.
The SEC said that they could not find evidence that Dex ever existed. Additionally, they could not find any evidence that Dropil ever traded in the crypto market and generated a profit. In the recent past, the SEC has become quite good at tracking down projects that are illegally raising funds using ICOs. As a result, projects such as Dropil, which might have escaped its radar in 2018, are now paying the price. The Dropil project is one in many cases that the SEC has been pursuing in the recent past.
For instance, in October 2019, the SEC sued Block.one and settled for $24 million with them. In February this year, the SEC sued Enigma, a project that was working on enhancing privacy for dApps. The issue of contention was an ICO that Enigma held in 2017. During the ICO, the company managed to raise $45 million from investors. Enigma agreed to settle with the SEC and it refunded all the funds it had raised from investors. Besides that, they agreed to pay a $500,000 penalty.
In the latest lawsuit, the SEC is also disputing some of the claims made by Dropil. For instance, Dropil claimed that it raised $54 million from over 34,000 investors. However, that seems to have been hype created by the company to dupe unsuspecting investors. The SEC’s investigation revealed that the company only managed to raise a small fraction of that money and only 2,500 investors fell for the scam.
In its lawsuit, the SEC is seeking disgorgement, injunctive relief, and civil penalties. Thus far, it is not clear where Dropil will agree to settle with the SEC. If you are new to the crypto sector, you should be wary of scams. Just like any other investment decision, you must conduct due diligence before you commit funds to any project.
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