The Week in FinTech and Blockchain Law(2)

By Robert Kim

The Securities and Exchange Commission permanently barred a repeat securities fraud offender based on a scheme to raise funding via an initial coin offering. David T. Laurance fraudulently attempted to raise money for Tomahawk Exploration LLC through the sale of “Tomahawkcoin” tokens, the SEC said.

In Saudi Arabia, a government committee warned that Bitcoin and other virtual currencies are illegal in the kingdom.

The following are updates to the Digital Currency, Blockchain, FinTech Regulatory Relief, and ICO Trackers, available on Bloomberg Law, from the week of August 13-17, 2018. They include U.S. federal, U.S. state, and foreign government actions affecting the use of digital currency and blockchain, and regulatory enforcement actions and private class action litigation against ICOs.

Digital Currency

Saudi Arabia: “The Unauthorized Virtual Currencies Are Illegal Inside the Kingdom of Saudi Arabia”

  •  Saudi Arabia’s standing committee for awareness on dealing in unauthorized securities activities in the foreign exchange market, composed of the Capital Market Authority, Ministry of Interior, Ministry of Media, Ministry Commerce and Investment, and the Saudi Arabian Monetary Authority, warned that unauthorized virtual currencies are illegal in the Kingdom of Saudi Arabia.
  •  The committee stated that Bitcoin and other virtual currencies are illegal in the kingdom and no parties or individuals are licensed for such practices. The committee also warned against trading in virtual currencies due to the high regulatory, security and market risks involved, as well as the risk of fraud.
ICO

SEC: SEC Permanently Bars Perpetrator of “Tomahawkcoins” Oil Exploration ICO Fraud

  •  The SEC obtained permanent officer-and-director and penny stock bars against David T. Laurance, founder of Tomahawk Exploration LLC, for attempting to raise money through the sale of “Tomahawkcoin” tokens.
  •  Promotional materials used inflated projections of oil production that were contradicted by the company’s own internal analysis and misleadingly suggested that Tomahawk possessed leases for drilling sites when it did not, and the materials described Laurance as having a “flawless background” without disclosing his prior criminal conviction for his role in fraudulent securities offerings.
  •  Tomahawk claimed that token owners would be able to convert Tomahawkcoins into equity and potentially profit from the anticipated oil production and secondary trading of the tokens. Although the ICO failed to raise money, Tomahawk issued tokens through a “Bounty Program” in exchange for online promotional services.
  •  Without admitting or denying the SEC’s findings, Tomahawk and Laurance consented to a cease and desist order, and Laurance consented to an officer and director bar, penny stock bar, and a $30,000 penalty.
  •  Press Release: SEC Bars Perpetrator of Initial Coin Offering Fraud
  •  Cease and Desist Order: In the Matter of Tomahawk Exploration LLC and David Thompson Laurance

To contact the reporter on this story: Robert Kim in Washington at rkim@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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