CEO Sold Worthless Digital Tokens and Use Proceeds for a Hawaii Apartment, DOJ Says

Getty Images | Namthip Muanthongthae

The Department of Justice says the CEO of an alleged cryptocurrency investment firm has pleaded guilty to his role in a crypto fraud scheme that raised $21 million from investors.

Michael Alan Stoller (aka “Michael Stoller”), 54, was the CEO and founder of Titanium Blockchain Infrastructure Services (TBIS) in California. Friday pleaded guilty to a securities fraud charge in US District Court for the Central District of California and faces up to 20 years in prison as scheduled in November, according to a Justice Department announcement Monday.

Stollery launched the fraudulent crypto offering in January 2018, according to the Department of Justice. The Securities and Exchange Commission has filed a previous lawsuit against Stollery and his company and won a ruling that will return at least some of the money to fraudulent investors.

The Justice Department said Stoller had lured investors into buying his company’s cryptocurrency “through a series of false and misleading statements.” Stoller admitted that he “did not use the invested money as promised, but instead mixed the ICO investors’ money with his personal money, using at least a portion of the proceeds from the offering to cover expenses not related to TBIS, such as credit card payments and bills for the Stolleri condominium in Hawaii,” According to the Ministry of Justice press release.

As stated in the press release:

Stolleri admitted that, to entice investors, he falsified aspects of the TBIS whitepaper, which allegedly provided investors and potential investors with an explanation of the crypto investment proposal, including the purpose and technology behind the offer, how the offer was different from other cryptocurrency opportunities, and the prospects for profitability. the offer. Stollery also planted fake client testimonials on the TBIS website and falsely claimed to have business relationships with the Federal Reserve and dozens of prominent companies to create the semblance of legitimacy.

The criminal case is sealed, but the court file with the Justice Department’s allegations, filed in May 2022, is available here.

Cryptographic code “has no functions”

Titanium sold a utility token called “BAR,” but the token “had no functionality at the time of the ICO.” [initial coin offering]The Ministry of Justice claimed.

As Cointelegraph explains, “a utility token is a special type of crypto asset that is primarily intended to raise funds for the development of a cryptocurrency project.” Utility tokens “do not represent any ownership interest in the project being invested in” but “allow the owner to buy or sell the underlying tokens on a preferential basis,” and “may generate profits for the token purchaser if the project ends up reaching its intended purpose with reasonable success.”

The Justice Department said Stolley “promoted TBIS as an investment and confirmed that BAR holders will participate in TBIS’s future earnings and BAR digital asset valuation.” The Justice Department said he also compared investing in TBIS to buying Google stock when the share price was just $75.

Stollery also ran a technology advisory services firm called EHI and claimed in the white papers that Titanium Blockchain would “simply inherit EHI clients.” Stollery claimed that its clients include Accenture, Apple, Boeing, Cargill, Citizens Bank, eBay, General Electric, HP, Honeywell, IBM, Intel, Microsoft, PayPal, Pfizer, Synchrony Financial, Federal Reserve Bank, Royal Bank of Scotland and Universal Studios. Disney and others.

“As a result of the fraudulent scheme… Defendant Stollery obtained approximately $21 million in various digital assets, such as Ether and Bitcoin, and cash from dozens of investors located in at least 18 states, including California, and abroad, who purchased bar “.

Before the ICO was announced, Stollery used social media to amplify the Titanium Blockchain as a “startup that seeks to develop an IT platform using blockchain technology,” the Department of Justice said. On various social media accounts, TBIS’s profile contained some variation of the following marketing message: “Just as steel changed the construction industry forever, Titanium will usher in a new era of network building, based on blockchain technology.” ”

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