"Titanium Blockchain CEO Sentenced to 4 Years in Prison

Michael Stollery, the CEO of California-based firm Titanium Blockchain Infrastructure Services (TBIS), has been sentenced to four years in prison for his role in a cryptocurrency fraud scheme that raised approximately $21 million through an initial coin offering (ICO) in 2018. Stollery was accused of not registering the ICO with the US Securities and Exchange Commission (SEC) and of falsifying aspects of TBIS’ whitepapers and planting fake client testimonials on its website to mislead investors. He also commingled ICO investors’ funds with his own, using some of the money to pay for unrelated expenses.

Stollery pleaded guilty to one count of securities fraud in July 2022 and was sentenced to a total of four years and three months in prison, despite facing up to 20 years. The SEC has been ramping up actions against the cryptocurrency space in recent years, with 30 enforcement actions against digital-asset market participants in 2022, up 50% from the previous year. Of the 30 total enforcement actions, 14 involved ICOs, with more than half including a fraud allegation.

The increase in SEC enforcement is partly due to its implementation of the US Supreme Court’s Howey test, which allows it to pursue actions alleging that tokens issued in ICO-related unregistered securities offerings were investment contracts subject to SEC regulation and enforcement. The Gensler administration has also seen an increase in assistance to the SEC from outside agencies and organizations during crypto-related investigations.

The case against Stollery is a warning to other firms and individuals in the cryptocurrency space that fraudulent conduct will not be tolerated, and that the SEC is stepping up its efforts to protect investors. The rise in enforcement actions underscores the need for greater scrutiny and regulation of the cryptocurrency market, which remains highly speculative and subject to significant volatility.

Despite the risks, many investors are attracted to cryptocurrency as a means of diversifying their portfolios and potentially generating high returns. However, the lack of regulation and oversight means that there is little protection for investors, who are often left vulnerable to scams and frauds.

The SEC has repeatedly warned investors about the risks associated with ICOs, including the lack of transparency, the potential for fraudulent activity, and the absence of investor protections. The agency has also issued guidance on how to identify and avoid fraudulent ICOs, including conducting due diligence on the company and its management, understanding the business model, and assessing the risks.

As the cryptocurrency market continues to grow and mature, it is likely that we will see further regulatory and enforcement actions, as governments and regulators seek to protect investors and ensure that the market operates in a fair and transparent manner. Investors in the cryptocurrency space should be aware of the risks involved, and take steps to protect themselves from potential fraud and scams.