Titanium Blockchain CEO gets 4 years in prison over $21M ICO scam
The founder of Titanium Blockchain Infrastructure Services Inc. (TBIS) has been sentenced to four years and three months in federal prison for defrauding hundreds of investors of over $21 million.
Michael Stollery, the project’s founder, pleaded guilty to charges bordering on securities fraud in the scheme dating back to 2017. Prosecutors say Stollery misled investors by claiming to offer impressive returns on deposits that turned out to be a sham.
Stollery allegedly misrepresented the contents of the project’s white paper and falsified customer testimonials on TBIS’ website to lure investors into its initial coin offering (ICO). In an attempt to project legitimacy, Stollery told investors that he had extensive connections with several high-value companies in the United States and the Federal Reserve.
“Stollery did not use the invested money as promised, but instead commingled the ICO investors’ funds with his personal funds, using at least part of the offering for expenses unrelated to TBIS, such as credit card payments and paying bills for his Hawaii condominium ,” says the statement from the Ministry of Justice (DoJ).
The US Securities and Exchange Commission (SEC) warned investors that TBIS was not authorized to conduct an ICO, due to his inability to seek registration with the commission. Furthermore, the SEC disclosed that Stollery’s firm was not granted any exemption for offering securities to the public.
Given the weight of the charges against him, Stollery was facing up to 20 years in prison, but it appears his willingness to cooperate with authorities and offer restitution to victims contributed to a reduced sentence. Stollery pleaded guilty to one count of securities fraud in 2022 in a case led by the DoJ, the FBI, the Federal Reserve and the Bureau of Consumer Financial Protection.
Since the start of 2023, the DoJ has won several victories against bad actors in the digital currency space. Just weeks after the DoJ announced it had opened an investigation into the collapse of Terra for fraud, law enforcement arrested its founder, Do Kwon, in Serbia after nearly 12 months on the run.
A trail of victories in their wake
The streak of victories by the DoJ against bad actors in digital currency has been hailed by industry stakeholders as key to preserving investor confidence in the sector. Cornerstone Research noted that enforcement actions by the SEC and other law enforcement agencies in 2022 rose over 50% from 2021.
The bulk of the cases relate to the 2017 ICO book and come on the heels of the commission increasing the size of its digital currency monitoring unit and a strict application of the Howey test.
In September, the DoJ announced the creation of a new network to crack down on digital asset crime, with the team consisting of 150 officials from US attorneys’ offices across the country.
See: Law and Order Compliance for Blockchain and Digital Assets
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