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SEC Blasts Canadian Cryptocurrency Startup As 'Full-Fledged Cyber Scam'

ICO funds were used to pay for home decor.

Jordan Pearson

Jordan Pearson

Image: Shutterstock

PlexCoin, a Canadian digital token startup, is flatly “a scam,” according to the US Securities and Exchange Commission.

The SEC filed for an emergency freeze of the US assets of the company and those of its founders, Quebecers Dominic Lacroix and Sabrina Paradis-Royer, on Friday. In a press release on Monday, the agency said PlexCoin has “all of the characteristics of a full-fledged cyber scam.” Lacroix’s assets in Quebec have already been frozen by the Autorité des marchés financiers (AMF), the province’s financial regulator.

PlexCoin is a digital token on the Ethereum platform that launched with an Initial Coin Offering (ICO). During the ICO fundraising round, which began in August, the SEC states that thousands of investors traded $15 million USD worth of cryptocurrency for PlexCoin tokens. But while tokens for some Ethereum apps are functional, PlexCoin tokens had no discernable purpose except to become more valuable as people buy and sell them while promising eye-popping returns.

Read More: An Ethereum Startup Just Vanished After People Invested $374K

The SEC filed for an emergency freeze of the US assets of the company and those of its founders, Quebecers Dominic Lacroix and Sabrina Paradis-Royer, on Friday. In a press release on Monday, the agency said PlexCoin has “all of the characteristics of a full-fledged cyber scam.” Lacroix’s assets in Quebec have already been frozen by the Autorité des marchés financiers (AMF), the province’s financial regulator.

PlexCoin is a digital token on the Ethereum platform that launched with an Initial Coin Offering (ICO). During the ICO fundraising round, which began in August, the SEC states that thousands of investors traded $15 million USD worth of cryptocurrency for PlexCoin tokens. But while tokens for some Ethereum apps are functional, PlexCoin tokens had no discernable purpose except to become more valuable as people buy and sell them while promising eye-popping returns.

In July, Lacroix was ordered by the AMF to stop issuing PlexCoin tokens. He did not stop doing this, and in October Lacroix was found to be in contempt of court.

“The AMF welcome with a lot a satisfaction the SEC’s decision,” AMF spokesperson Sylvain Théberge wrote me in an email. “This the result of a good collaboration between the two regulators.”

Motherboard reached out to PlexCoin via email but didn’t receive a response.

Lacroix and Paradis-Royer made several misrepresentations, according to the SEC. The PlexCoin site told investors that there was a global team of experts behind the token and that the ICO funds would be used to develop software. Instead, the SEC states, there was “no group of experts working across the globe,” and “the proceeds from the PlexCoin ICO were [...] were intended to fund Lacroix and Paradis-Royer's expenses including home decor projects.”

Interestingly, the SEC also notes that PlexCoin is an illegal security under US law since the company did not register its ICO. This may be because the value of PlexCoin was advertised as being based on, in part, “the managerial efforts of PlexCorps' team of supposed experts,” the SEC complaint states. Earning money from the managerial efforts of others was a key part of the SEC’s previous ruling that DAO tokens were securities.

PlexCoin is just the latest ICO to be accused of being an unequivocal scam. In November, an Ethereum startup that raised roughly $374,000 USD during its ICO disappeared from the internet. Sort-of related: A Canadian investment firm focusing on ICOs also recently opted to return money to its investors after being outed for lying about its advisors.

If anyone needed a reminder to be vigilant about their investments, this is it.

In July, Lacroix was ordered by the AMF to stop issuing PlexCoin tokens. He did not stop doing this, and in October Lacroix was found to be in contempt of court.

“The AMF welcome with a lot a satisfaction the SEC’s decision,” AMF spokesperson Sylvain Théberge wrote me in an email. “This the result of a good collaboration between the two regulators.”

Motherboard reached out to PlexCoin via email but didn’t receive a response.

Lacroix and Paradis-Royer made several misrepresentations, according to the SEC. The PlexCoin site told investors that there was a global team of experts behind the token and that the ICO funds would be used to develop software. Instead, the SEC states, there was “no group of experts working across the globe,” and “the proceeds from the PlexCoin ICO were [...] were intended to fund Lacroix and Paradis-Royer's expenses including home decor projects.”

Interestingly, the SEC also notes that PlexCoin is an illegal security under US law since the company did not register its ICO. This may be because the value of PlexCoin was advertised as being based on, in part, “the managerial efforts of PlexCorps' team of supposed experts,” the SEC complaint states. Earning money from the managerial efforts of others was a key part of the SEC’s previous ruling that DAO tokens were securities.

PlexCoin is just the latest ICO to be accused of being an unequivocal scam. In November, an Ethereum startup that raised roughly $374,000 USD during its ICO disappeared from the internet. Sort-of related: A Canadian investment firm focusing on ICOs also recently opted to return money to its investors after being outed for lying about its advisors.

If anyone needed a reminder to be vigilant about their investments, this is it.

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