US Regulator Charges Latvian Man for $7 Million Crypto Fraud

The US Securities and Exchange Commission (SEC) announced on Thursday that it charged a man for defrauding more than $7 million from hundreds of investors through two separate fraudulent digital asset securities offerings. According to a civil complaint filed against Ivars Auzins in the US District Court for The Eastern District Of New York, the SEC alleged that the defendant was the person behind the unregistered offer and sales of digital asset securities in an Initial Coin Offering (ICO) and a purported digital asset cloud mining service program.

The regulator claimed that Auzins, a citizen of Latvia, allegedly used fake names, fraudulent profiles and fictitious entities in carrying out activities against the US and foreign investors. Also, he misappropriated almost all of the funds that the investors raised.

The SEC filing alleged from January 2018 through March 2018 that Auzins was engaged in fraudulent offerings and the sales of unregistered digital tokens as part of an ICO of Denaria, a purported multi-currency debit card platform. He falsely told investors that Denaria allowed users to store their digital assets in a secure digital wallet and spend them just like any other debit card. The SEC stated that the services and products were fictitious and Auzins ran away with the ICO proceeds.

The SEC’s complaint mentioned the second scam had occurred between April 2019 and July 2019 in which Auzins fraudulently offered unregistered securities of a cloud mining program called 'Innovamine'. The agency alleged that Auzins falsely told investors that they could contribute digital assets to the cloud mining service. Following that, the company 'Innovamine' would perform mining activities and provide investors with a daily automatic payout on whichever coin they mine. The complaint revealed that such promises were false and that Auzins misappropriated almost all of the funds raised in the offering. While at least 25 US investors participated in Denaria’s ICO offering, more than 6 investors based in the US invested in the Innovamine cloud mining service.

Therefore, the SEC’s complaint charges Auzins with violations of antifraud and the registration provision of the federal securities laws. Thus, it seeks permanent injunctions, including disgorgements, conduct-based injunctions, civil penalties, prejudgment interest, and an officer- and director bar against the guilty party.

Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, commented on the development: “As we allege, Auzins was engaged in a brazen scheme to defraud retail investors under the guise of profitable digital asset opportunities. We will continue to detect and pursue those that seek to victimize investors in the digital asset space.”

The SEC Focuses on Consumer Protection

Scams are running rampant in the crypto markets as a huge rally in Bitcoin, the flagship cryptocurrency, appeals to investors. From October to March, the Bitcoin price has surged 450% to nearly $59,000, while rival coins like Ethereum and dogecoin have witnessed an impressive uptick. However, a lack of regulation and the anonymity of digital assets have created a ripe environment for digital crime. During the fourth quarter of 2020, consumers lost nearly $82 million to cryptocurrency scams. Also, in the first quarter of 2021, more than ten times that amount was lost from the same six-month period in the previous year.

While consumer interest in crypto assets such as Bitcoin has risen significantly, scammers have become more active in this area. Through the usage of social media aimed to promote investing tips, defrauders have taken advantage of everyone from small investors to Wall Street veterans. Reported scams include deceptive business opportunities and investments, bait-and-switch schemes and deceptively marketed mining machines. Furthermore, the US SEC has continued its efforts to hold fraudsters accountable and educate consumers about cryptocurrencies.