The US Securities and Exchange Commission (SEC) accused the founders of Dropil, Inc. of committing fraud. The regulator said that the firm not just mislead users by talking about a fake crypto trading bot but also falsified their profitability.
A scam scheme by Dropil
The SEC said that the three scammers from California have defrauded investors of millions of dollars using false claims and reports related to a fake crypto trading bot. It filed a complaint on April 23, accusing the company and its three founders with fraud and enticing investors to participate in a “fraudulent and unregistered” ICO. The company raised over $1.8 million from the offering.
The regulator accused that Patrick O’Hara, Zachary Matar, and Jeremy McAlpine sold DROP tokens to investors between January and March 2018. They told investors that their money will be used to trade numerous digital assets using a trading bot called Dex. They said that the proprietary algorithm for trading was developed by Dropil and the profits will be distributed in the form of DROP tokens to users every 15 days.
Dropil created false profitability reports
The founders pooled all investor money and diverted it to other projects. Not only this, but they also used the funds to their own bank accounts and digital assets. To give an illusion of profitability to the users, the firm created false reports to suggest that users were indeed earning well and enjoying great profits.
The SEC also accused them of misrepresenting the value and volume of DROP sold during the ICO. The firm claimed to have raised over $54 million from 34,000 investors while in reality, only 2,500 people participated in the ICO, raising $1.9 million.
The regulator is now seeking disgorgement of ill-gotten gains from the scammers alongside penalties. It is also seeking injunctive relief.
