Experience level: 
Intermediate
Intended Audience: 
Faculty
Authors: 
Christine P. Smith, Karen M. Foust, and

Securities Violation, Ethical Dilemma, or Smart Business Practice?

Embryo Critical Incident One can define an initial coin offering (ICO), “as a way to raise funds, where a company looking to raise money to create a new coin, app, or service launches an ICO. Interested investors can buy into the offering and receive a new cryptocurrency token issued by the company. This token may have some utility in using the product or service the company is offering, or it may just represent a stake in the company or project.” (Investopedia, Cryptocurrency, Initial Coin Offering) The SEC filed a lawsuit against Dominic Lacroix, PlexCorps, and Sabrina Paradis-Royer. The lawsuit alleged that investors purchased 81 million PlexCoin tokens for about $15,000,000 in an ICO. The SEC sought and received an emergency stop action “to stop Lacroix, a recidivist securities law violator in Canada, and his partner Paradis-Royer, from further misappropriating investor funds illegally raised through the fraudulent and unregistered offer and sale of securities.” Sec. & Exch. Comm'n v. PlexCorps, Complaint) The lawsuit alleges that the defendants promoted, offered and sold a security on the internet named PlexCoin to investors globally, including investors in the United States. The lawsuit further alleges that the defendants claimed that an investment in PlexCoin would yield an "ROI after 29 days or less" of 1,354%,629%, 332%, or 200% depending on when the investor purchased” The SEC's further charged the defendants with violating the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint also seeks permanent injunctions, disgorgement plus interest, and penalties.