FINRA makes first disciplinary action involving cryptos

FINRA has marked its disciplinary action involving cryptocurrencies by filing a complaint against Timothy Tilton Ayre.

The regulator has charged him with securities fraud and the unlawful distribution of an unregistered cryptocurrency security called HempCoin.

In the complaint, FINRA alleges that, from January 2013 through October 2016, Ayre attempted to lure public investment in his ‘worthless public company’, Rocky Mountain Ayre (RMTN) by issuing and selling HempCoin.

Ayre reportedly publicised it as ‘the first minable coin backed by marketable securities’ and made fraudulent, positive statements about RMTN’s business and finances. RMTN was quoted on the Pink Market of OTC Markets Group and traded over the counter.

FINRA also alleges that in June 2015, Ayre bought the rights to HempCoin and repackaged it as a security backed by RMTN common stock. Ayre marketed HempCoin as “the world’s first currency to represent equity ownership” in a publicly traded company and promised investors that each coin was equivalent to 0.10 shares of RMTN common stock.

Investors went on to mine more than 81 million HempCoin securities and bought and sold the security on two cryptocurrency exchanges. As a result of the allegations, FINRA has charged Ayre with the unlawful distribution of an unregistered security because he never registered HempCoin and no exemption to registration applied.

Earlier this year, Bank of England governor Mark Carney called for Cryptocurrencies to be regulated. Speaking at the inaugural Scottish Economics Conference, Carney said that the currencies themselves could present a future risk to financial stability and called for them to be more rigorously regulated.

The European Union also recently warned that it plans to regulate cryptocurrencies if an effort is not made to tackle risk. Valdis Dombrovskis, the EU’s financial chief, said that worldwide measures were needed if European regulation was to be avoided.

Copyright © 2018 RegTech Analyst

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