CEO sold worthless crypto tokens and used proceeds for Hawaii condo, DOJ says

The CEO of a purported cryptocurrency financial commitment business pleaded guilty for his job in a crypto fraud scheme that lifted $21 million from buyers, the Department of Justice said.

Michael Alan Stollery (aka “Michael Stollaire”), 54, was CEO and founder of the California-primarily based Titanium Blockchain Infrastructure Products and services (TBIS). He pleaded guilty Friday to a single depend of securities fraud in US District Court docket for the Central District of California and faces up to 20 several years in jail at his scheduled sentencing in November, according to a Department of Justice announcement Monday.

Stollery introduced his fraudulent crypto featuring in January 2018, according to the DOJ. The Securities and Trade Commission beforehand sued Stollery and his corporation and gained a judgment that will return at least some of the dollars to defrauded buyers.

The DOJ reported Stollery lured buyers to obtain his firm’s cryptocurrency “by means of a series of false and deceptive statements.” Stollery “admitted that he did not use the invested revenue as promised but in its place commingled the ICO investors’ funds with his private funds, utilizing at the very least a part of the giving proceeds for expenditures unrelated to TBIS, these kinds of as credit score card payments and the payment of expenditures for Stollery’s Hawaii condominium,” according to the DOJ push release.

The press launch also reported:

Stollery admitted that, to entice investors, he falsified areas of TBIS’s white papers, which purportedly presented buyers and future traders an clarification of the cryptocurrency financial investment presenting, including the goal and technological innovation at the rear of the providing, how the offering was distinctive from other cryptocurrency possibilities, and the prospective customers for the offering’s profitability. Stollery also planted fake shopper testimonials on TBIS’s web site and falsely claimed that he experienced company associations with the Federal Reserve and dozens of outstanding corporations to produce the bogus visual appeal of legitimacy.

The legal case is sealed, but a courtroom submitting with the DOJ’s allegations, filed in Might 2022, is out there in this article.

Crypto token “did not have any functionality”

Titanium offered a utility token identified as a “BAR,” but the token “did not have any performance at the time of the ICO [initial coin offering],” the DOJ alleged.

As Cointelegraph points out, “a utility token is a unique type of cryptographic asset that is primarily aimed at garnering the resources important to develop a cryptocurrency challenge.” Utility tokens “do not depict any possession stake in the undertaking remaining invested in” but “permit the holder to purchase or provide the fundamental tokens on a preferential basis,” and “may perhaps produce gains for the token acquirer if the task ends up reaching its supposed intent with reasonable achievement.”

Stollery “promoted TBIS as an investment decision and emphasized that holders of BAR would share in TBIS’s potential earnings and in appreciation in the worth of the BAR digital property,” the DOJ explained. He also when compared investing in TBIS to acquiring Google inventory when it was only $75 a share, the DOJ claimed.

Stollery also ran a technological innovation consulting providers firm identified as EHI and claimed in white papers that Titanium Blockchain “will just inherit EHI’s clientele.” Stollery claimed his clients incorporated Accenture, Apple, Boeing, Cargill, Citizens Bank, eBay, Common Electrical, HP, Honeywell, IBM, Intel, Microsoft, PayPal, Pfizer, Synchrony Economical, the Federal Reserve Bank, the Royal Financial institution of Scotland, Common Studios, Disney, and some others.

“As a final result of the fraudulent scheme… defendant Stollery attained somewhere around $21 million in the type of different digital assets, such as Ether and Bitcoin, and cash from dozens of traders positioned in at least 18 states, together with California, and overseas, who bought BAR,” the DOJ claimed.

Prior to announcing the ICO, Stollery utilised social media to hoopla Titanium Blockchain as “a start-up company looking for to develop an IT platform employing blockchain technologies,” the DOJ stated. “On its many social media accounts, TBIS’s profile contained some variation of the subsequent marketing and advertising message: ‘Just as steel adjusted the setting up marketplace forever, Titanium will usher in a new period of network construction, primarily based on blockchain technological innovation.'”