SEC Takes Emergency Action Against High Street Capital ICO
The US regulator charges Pennsylvania-based ICO issuers with violating the antifraud provisions of federal securities laws
What Happened?
June 19, 2020: The Securities and Exchange Commission obtained a temporary restraining order and asset freeze against the companies Hvizdzak Capital Management, LLC, High Street Capital, LLC, and High Street Capital Partners, LLC. Brothers Sean Hvizdzak and Shane Hvizdzak offered securities in a private fund and allegedly misrepresented fund performance, fabricated financial statements, and forged audit documents.
Source: https://www.sec.gov/news/press-release/2020-137
Who Is Impacted?
Current investors and advisors of the project; companies that have conducted a non-compliant token offering.
Why This Matters?
While the Hvizdzak brothers clearly had fraudulent intentions, the current precedent shows that any company making misleading statements in its investor communications–even if by mistake–would be treated by the U.S. regulators in the same way.
While fraudulent schemes are not uncommon in the traditional securities world, the percentage of issuers conducting offering fraud and the misappropriation of investor proceeds is significantly higher in the ICO world–and thus attracts a lot of attention from regulators.
To avoid similar action, companies operating in the digital securities space should make sure that their investor communications are compliant.
What’s Next?
In addition to an asset freeze and a temporary restraining order, the court ordered an accounting audit, expedited discovery, and an order prohibiting the destruction of the entities’ documents. A hearing is scheduled for June 30, 2020, in order to consider continuing the asset freeze and the issuance of a preliminary injunction for a longer period.
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Thomas Linder
Thomas Linder has broad experience in advising Swiss and foreign companies in international tax matters. He is particularly specialized in leading inter-disciplinary projects in the context of acquisitions, corporate restructurings, and migrations and has in-depth...
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Jordan is a marketing veteran with more than a decade of experience. He leads a team of digital marketing and website design experts as Promotions & Strategy Director for Primal Tribe New Media, a company focused on reinventing multi-channel, integrated marketing...
Jim Mutter, In-House Counsel
Jim is the owner and founder of Whiteboard Law, a boutique business law firm that specializes in mergers and acquisitions and venture capital financing, with a focus on emerging technology companies. He formerly served three years as president of the Premier’s...
