The Massachusetts Securities Division recently levied $1 million in fines against U.S. Data Mining Group (DMG) for allegedly conducting unregistered securities offerings. The Division, in its complaint, alleged that the bitcoin mining company failed to register its stock while fundraising. DMG also failed to notify investors that two of the company’s promoters had previously violated US federal securities laws during their Series A fundraising, which raised nearly $25 million in March of 2021.
DMG also failed to register this offering with the state’s Securities Division, even though they raised $3.5 million from Massachusetts residents.
DMG knew since at least 12/4/2020 that registrations exemptions for conducting offerings was not an option, according to the regulator. In fact, the company clearly stated this in their promissory notes issued at that time, because of the past histories of some of the promoters, according to the consent order.
According to the SEC Form D submitted, the DMG officers are:
- Asher Genoot, Chief Operating Officer, Executive Officer and Director, Miami, FL
- William J. Stuart, Executive Officer, Miami, FL
- Stanley O’Neal, Director, Miami, FL
In 2018, the SEC charged several individuals with operating a “pump-and-dump” scheme, using shell companies to hide ownership of the stock. They paid promoters to distort the value of the target companies, then made plans to trade the shares in their group to inflate the share prices and make it look profitable, according to the SEC. Some of these individuals went on to form DMG.
As a result, two of the defendants were ordered to pay more than $1 million in disgorgement, along with a civil penalty of $160,000, and restrained with a court order from future securities laws violations. None of this was disclosed to the DMG investors at the time of the offerings.
When making the settlement, DMG neither admitted nor denied the allegations. According to the order, DMG will offer refunds to the Massachusetts investors’ stock with interest.
Cryptocurrency Ponzi Schemes
In a statement, Commonwealth Secretary William F. Galvin said, “I can’t stress enough the importance of knowing who you’re dealing with when you invest your money,” he said. “This is especially important when your investments involve bitcoin mining and cryptocurrency, which have in recent years been popular vehicles used by scammers to defraud innocent investors.”
As with any type of securities or investments, due diligence is important, as well as not investing more money than you can afford to lose.
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