RegulationJanuary 22, 2020

SEC Charges Convicted Criminal Over Fraudulent Coin Offering

Alleged perp in crypto-currency scam, Boaz Manor, said to dye his hair, grow a beard to hide identity.

Reported by Michael Katz

The SEC has charged Canadian ex-con Boaz Manor, his business associate Edith Pardo, and their companies CG Blockchain and BCT. SEZC, with raising more than $30 million from hundreds of investors in a fraudulent initial coin offering (ICO).

Manor and Pardo marketed and sold digital asset securities in a purported effort to develop a suite of technology solutions for hedge funds and other traders investing in digital assets, according to the regulator’s complaint. In a parallel action, the US Attorney’s Office for the District of New Jersey announced criminal charges against Manor and Pardo, an Israeli citizen.

Manor allegedly dyed his hair, grew a beard, and used aliases to conceal his identity, and to hide that he had served a year in prison after pleading guilty to criminal charges related to the collapse of a Canadian hedge fund. Following his release from prison, Manor founded CG Blockchain Inc. and began creating a product called ComplianceGuard, which was purportedly intended to provide hedge funds with a blockchain-based auditing tool.

According to the US Attorney’s Office, Manor secured a significant portion, if not all, of the initial seed money in CG Blockchain from a close family member. In order to conceal the source of this money, Manor recruited Pardo to act as a conduit for the money. Manor allegedly misled investors into thinking Pardo was the sole owner of the companies who had invested millions of her own funds in the business, while portraying himself as merely a consultant who worked for her.

“In fact, Pardo neither invested millions in the business nor exercised managerial authority over it, and instead acted merely as a front that concealed Manor’s true control over the business,” said the SEC’s complaint. “In addition, the purported president of the business did not have significant decision-making authority, and the purported ‘executive team’ consisted of hired consultants who similarly did not exercise senior managerial control.”

Manor also allegedly admitted to certain investors that he hid his identity because its disclosure would result in “the company being destroyed.” The complaint alleges that he and Pardo claimed to have 20 hedge funds testing technology to record transactions on a distributed ledger or blockchain. But they had only sent a prototype to a dozen funds, and none of the funds used it or paid for it, said the SEC.

“Learning about the identity and background of the individual or individuals behind a venture is one of the first things we tell investors to do before trusting anyone with their money,” Joseph Sansone, head of the SEC’s Market Abuse Unit, said in a release. “Manor’s brazen scheme to conceal his identity and criminal history deprived investors of essential information and allowed the defendants to take over $30 million from investors’ pockets.”

The SEC charged Manor and Pardo with violating the antifraud and securities registration provisions of the federal securities laws. It is seeking disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief. The SEC is also requesting orders barring Manor and Pardo from acting as officers or directors of public companies, and from participating in future securities offerings.