SEC Charges Attorney and Law Firm Business Manager With Illegal Sales of UBI Blockchain Internet Stock
The Securities and Exchange Commission today charged two men alleged to have profited from illegal sales of stock of a company claiming to have a blockchain-related business.
According to the SEC’s complaint, attorney T.J. Jesky and his law firm’s business affairs manager, Mark F. DeStefano, made approximately $1.4 million by selling shares in UBI Blockchain Internet Ltd. over a 10-day period from Dec. 26, 2017 to Jan. 5, 2018. The sales stopped when the SEC temporarily suspended trading in UBI Blockchain stock earlier this year due to concerns about the accuracy of assertions in its SEC filings and unusual and unexplained market activity.
“This case is a prime example of why the SEC has warned retail investors to be cautious before buying stock in companies that suddenly claim to have a blockchain business,” said Robert A. Cohen, Chief of the SEC Enforcement Division’s Cyber Unit. “This case involved both a trading suspension and people holding restricted shares who attempted to profit from the dramatic price increase with illegal stock sales that violated the registration statement.”
The SEC’s complaint alleges that Jesky, and DeStefano, both residents of Nevada, received 72,000 restricted shares of UBI Blockchain stock in October 2017 and were permitted to sell the shares at a fixed price of $3.70 per share under the registration statement. Instead, the complaint alleges that Jesky and DeStefano unlawfully sold the shares at much higher market prices – ranging from $21.12 to $48.40 – when UBI Blockchain’s stock experienced an unusual price spike.
The SEC’s Office of Investor Education and Advocacy has issued an Investor Bulletin on initial coin offerings and a mock ICO website to educate investors. Additional information about ICOs is available on Investor.gov and SEC.gov/ICO.
The SEC’s complaint, filed in federal court in New York, charges Jesky and DeStefano with violating the registration provisions of the federal securities laws. Without admitting or denying the allegations in the SEC’s complaint, Jesky and DeStefano agreed to return approximately $1.4 million of allegedly ill-gotten gains, pay $188,682 in penalties, and be subject to permanent injunctions. The settlement is subject to the court’s approval.
The SEC’s investigation, which is ongoing, is being coordinated by the Microcap Fraud Task Force and the Cyber Unit and is being conducted by Michael D. Paley, Kevin P. McGrath, Tracy E. Sivitz, John P. Lucas, and Ricky Tong. The matter is being supervised by Lara S. Mehraban and Mr. Cohen. The SEC appreciates the assistance of the Financial Industry Regulatory Authority, the Mexican Comisión Nacional Bancaria y de Valores, and the Panamanian Superintendencia del Mercado de Valores.