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Automata - SEC Files Suit Against “Robotic” Cryptocurrency Multi-Level Marketing Scheme

The U.S. Securities and Exchange Commission (SEC) charged two promoters for acting as unregistered brokers.  The SEC action was filed in tandem with a criminal indictment by the U.S. Department of Justice against the same defendants.

The defendants sold the securities of AirBit Club, an investment scheme that targeted Spanish-speaking communities and promised high returns from investments in cryptocurrency though the use of “automated robots” connected to “international exchanges”. The scheme also compensated members to attract others to the scheme.  It does not appear that there were any cryptocurrency or other investments made of the AirBit Club.  

The SEC alleges that the defendants solicited investors for AirBit Club through social media platforms and in-person meetings, without registering with the SEC. According to the SEC, the defendants posted videos to thousands of followers on their YouTube channels and received substantial compensation from AirBit for the sale of the securities. Airbit Club was a classic pyramid scheme where the funds raised by the defendants were used to purchase luxury goods and repay existing investors.  The SEC alleges the defendants in addition to taking part in a fraud, failed to register as a broker-dealer in violation of Section 15(a) of the Securities Exchange Act of 1934.

The case represents a trifecta of enforcement priorities: illegally offered securities, sold by unregistered brokers, using a multi-level marketing affinity scheme. This case is like other SEC enforcement actions involving crypto currencies in which fraudsters attract investors with promises of substantial returns in purported digital assets and blockchain technology. 

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume X, Number 247
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About this Author

Richard Levin Polsinelli Fintech Attorney
Shareholder

Richard Levin is the Chair of Polsinelli’s Chambers rated FinTech and Regulation Practice.  He brings his experience as a senior legal and compliance officer on Wall Street and in London to bear in advising clients on corporate, securities and regulatory issues. A problem-solver by nature, his practice focuses on helping financial services and technology (FinTech) clients identify and address regulatory issues as they build their businesses.

The FinTech sector is...

303.583.8261
Jason A. Nagi, Polsinelli, Distressed note purchases lawyer, Real estate matters attorney
Shareholder

Jason Nagi helps clients find the most efficient route to their desired result and clients have relied on him to get them what they need – in and out of the courtroom – for more than a decade.

He has significant experience representing parties involved in the following matters:

  • Foreclosing lenders realizing on their collateral

  • Distressed note purchases

  • Real estate

  • Related bankruptcy and out-of-court...

212.644.2092
Paul Roshka, Polsinelli, financial securities lawyer
Shareholder

Known for his thorough preparation and persistence, Paul Roshka has a national practice representing companies, their directors, officers, and employees during investigations and enforcement/disciplinary proceedings involving potential violations of the federal and state securities laws, and other financial regulatory statutes and rules. He has handled matters initiated by almost every SEC Regional Office and FINRA District Office, and their Home Offices in Washington, D.C.

He is also a recognized bet-the-company litigator. Paul has defended securities/financial...

602.650.2098
Andrew T. Fox Phoenix Polsinelli Government Investigations Labor and Employment Commercial Litigation Litigation and Dispute Resolution
Associate

As a member of Polsinelli’s Government Investigations practice, Andrew assists clients in all aspects of white collar criminal defense and internal corporate investigations. Working to understand each client’s unique situation, he helps guide clients through government inquiries and provides counsel that aligns to their business strategies. Andrew has experience drafting briefs, memoranda and responding to discovery requests.

Prior to joining Polsinelli, Andrew served as a law clerk to The Honorable Judge Douglas L. Rayes on the United States District Court for the District of...

602-650-2014
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