An SEC lawsuit against the alleged operators of a fraudulent ICO has been halted amid parallel investigation concerns.
Prosecutors have paused a United States Securities and Exchange Commission (SEC) lawsuit against the alleged operators of a $30 million fraudulent ICO amid concerns that proceedings may impact the integrity of a parallel investigation into the defendants.
The United States attorney’s office for New Jersey intervened in the case on April 2.
SEC suit paused amid integrity concerns over the parallel investigation
The SEC action against defendants Boaz Manor, Edith Pardo, and the associated companies CG Blockchain Inc and BCT Inc has been halted to maintain the integrity of parallel criminal investigations into the pair’s scheme.
The prosecutors argued that the stay is needed to prevent the accused from obtaining information under the broad rules of civil discovery that would otherwise be unattainable under the narrow scope of criminal discovery.
“A civil litigant should not be permitted to proceed simultaneously with an overlapping criminal matter, because ‘the similarity of the issues [leaves] open the possibility that [the defendant] might improperly exploit civil discovery for the advancement of his criminal case,’” the government stated.
The SEC charged Boaz Manor, his business associate, and two companies, CG Blockchain Inc. and BCT Inc. SEZC, with violating federal anti fraud and securities registration provisions of the federal securities laws during January.
While Pardo was arrested and later released, Manor remains at large. However, both individuals’ respective legal representation have consented to the staying of the complaint. The complaint was filed on Jan. 12.
From hedge fund embezzlement to ICO fraud
From 2014 until 2018, the pair allegedly made a series of misrepresentations regarding CG Blockchain’s operations — including fraudulently claiming 20 hedge funds were paying leasing fees to the firm for a non-existent product called ComplianceGuard.
The pair are also believed to have lied about Manor’s criminal background — with Manor having served a four-year prison sentence for siphoning $106 million from a now-defunct Canadian hedge fund that he had co-founded.
In August 2017, CG Blockchain launched an initial coin offering (ICO) to purportedly fund a product that the same 20 hedge funds had supposedly agreed to use. The ICO ended eight months later after absorbing roughly $30 million in crypto and fiat.