SEC Charges Latvian Citizen with Digital Asset Fraud
Litigation Release No. 25277 / December 3, 2021
Securities and Exchange Commission v. Auzins, No. 21 Civ. 6693 (E.D.N.Y. filed December 2, 2021)
The Securities and Exchange Commission charged a Latvian citizen with defrauding hundreds of retail investors out of at least $7 million through two separate fraudulent digital asset securities offerings.
According to the complaint, filed in U.S. District Court for the Eastern District of New York, Ivars Auzins defrauded U.S. and foreign investors through the unregistered offer and sale of digital asset securities in an initial coin offering and a purported digital asset cloud mining program. Auzins allegedly used fake names, fictitious entities, and fraudulent profiles to perpetrate his schemes, and misappropriated nearly all of the investor funds that were raised.
In the first scheme, the complaint alleges that, from January 2018 through March 2018, Auzins fraudulently offered and sold unregistered digital tokens as part of an ICO of Denaro, a purported "multi-currency debit card platform." Specifically, the complaint alleges that Auzins falsely claimed Denaro enabled users to store their digital assets in a secure digital wallet and then spend them "like any other debit card" which could be provided by a credit card issuer. In fact, the complaint alleges, all of the claimed products or services being offered were fictitious, including the relationship with the credit card issuer. Finally, the complaint alleges that Auzins misappropriated all of the ICO's proceeds.
In the second scheme, the complaint alleges that, from April 2019 to July 2019, Auzins fraudulently offered the unregistered securities of Innovamine, which purportedly offered a cloud mining program. According to the complaint, Auzins claimed that investors could contribute digital assets to Innovamine, and then the company would perform mining activities and provide investors with a daily "automatic payout . . . in whichever coin they mine." The complaint alleges that these promises were untrue, and that Auzins misappropriated nearly all of the funds raised in the offering.
The SEC's complaint charges Auzins with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 ("Securities Act") and the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The complaint seeks permanent injunctions, including conduct-based injunctions, disgorgement plus prejudgment interest, civil penalties, and an officer-and-director bar against him.
The SEC's investigation was conducted by Jon A. Daniels of the Cyber Unit. The case is being supervised by John O. Enright and Kristina Littman of the Cyber Unit and Thomas P. Smith, Jr. and Lara Shalov Mehraban of the New York Regional Office. The litigation is being conducted by Todd Brody and Mr. Daniels.