The Department of Justice (DOJ) announced that Michael Alan Stollery, the CEO and founder of Titanium Blockchain Infrastructure Services (TBIS), pleaded guilty to securities fraud for his role in a cryptocurrency scheme that involved raising approximately $21 million from investors in an initial coin offering (ICO). In an ICO, a cryptocurrency company sells digital tokens or “coins” to raise money.

According to the DOJ, Stollery admitted to falsifying details around “BARs,” the cryptocurrency coin issued by his firm. Stollery purportedly falsified white papers that explained how the underlying technology for the cryptocurrency works, what differentiated it from its competition, and the prospects for the ICO’s profitability.  He also placed fake testimonials on the company’s website and made-up business relationships in his efforts to attract investors. Specifically, according to the complaint, TBIS hyped nonexistent connections with companies like Apple, Boeing, IBM, Microsoft, and Walt Disney. The BAR coin was also never registered with the US Securities and Exchange Commission (SEC), as required by law.

Andrew Holmes, a lawyer who represents Mr. Stollery, said in a call that his client intended to run Titanium Blockchain as a legitimate business, but “it was overexuberance that went beyond what he should’ve done.”

TBIS was one of multiple ICO projects that drew fraud charges during a surge of coin-based fundraising. It was so prevalent around 2017 and 2018 that the SEC created its own fake site to warn buyers about such scams. Anyone who clicks on the “Buy Coins Now” button is instead directed to investor education tools and tips from the SEC and other financial regulators. “The rapid growth of the ICO market, and its widespread promotion as a new investment opportunity, has provided fertile ground for bad actors to take advantage of our Main Street investors,” said SEC Chairman Jay Clayton in a 2018 press release. Today, much of the alleged fraud involves non-fungible token (NFT) projects, but the legal system is still catching up to ICOs.

Stollery pleaded guilty to one count of securities fraud and faces up to 20 years in prison. He is currently out of custody on bond as he awaits his November 18 sentencing hearing. 

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