SEC v. Middleton, et al.
Case No. 19-cv-4625 (E.D.N.Y.)
On August 12, 2019, the Commission filed a complaint (the “Complaint”) against Veritaseum, Inc. and Veritaseum, LLC ("Veritaseum"), and their owner, Reginald Middleton ("Middleton") (collectively, the “Defendants”). In the Complaint, the Commission alleged the Defendants fraudulently raised millions of dollars in virtual currency from the unregistered sales of securities called "VERI" based on a series of false and misleading statements to potential and actual investors, including misrepresentations about the potential profitability and viability of Veritaseum's purported operations, the use of funds raised in the VERI ICO, and the amount of funds raised in the VERI ICO. The Commision also alleged that Middleton manipulated the price and volume of VERI on secondary digital-asset trading platforms during the VERI ICO. See the Complaint.
On November 1, 2019, the Court entered a final judgment that ordered the Defendants to pay $7,891,600 in disgorgement and $582,535 in prejudgment interest, and Middleton to pay a $1,000,000 civil penalty. The final judgment created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty, along with the disgorgement and prejudgment interest, can be distributed to investors harmed by the Defendants’ conduct described in the Complaint (the “Fair Fund”). Pursuant to their final judgment, the Defendants’ obligation to pay disgorgement and prejudgment interest, and Middleton’s obligation to pay a civil penalty will be deemed fully satisfied by the transmission and/or turnover of certain itemized assets set forth in paragraphs VIII, XVI, and XVII therein.
The final judgment also appointed Holland & Knight, LLP, as Distribution Agent for the Fair Fund to, among other things, oversee the administration and distribution of the Fair Fund to harmed investors and Miller Kaplan Arase LLP as Tax Administrator to fulfil the tax obligations of the Fair Fund. See the Final Judgment.
On May 22, 2020, the Distribution Agent filed its Motion for Entry of an Order Approving Claims Process, seeking approval of the first part of its plan for the distribution of the Veritaseum Fund. See the Distribution Agent's Motion. Opposition papers, if any, must be filed by May 29, 2020. See Endorsed Letter to Court.
On December 23, 2020, the Distribution Agent filed a Motion for an Order to Show Cause, seeking the entry of an Order to Show Cause why the Court should not approve the Distribution Agent’s proposed distribution plan and claims process in connection with the Fair Fund. See [Motion package 77-79]
For more information, please contact the Commission:
Office of Distributions