Getty Images | Namthip Muanthongthae
The CEO of an alleged cryptocurrency investment firm pleaded guilty to his role in a crypto-fraud scheme that collected $21 million from investors, the Justice Department said.
Michael Alan Stollery (aka “Michael Stollaire”), 54, was the CEO and founder of California-based Titanium Blockchain Infrastructure Services (TBIS). He pleaded guilty Friday to one count of securities fraud in the U.S. District Court for the Central District of California and faces up to 20 years in prison at his scheduled sentencing in November, according to a Justice Department announcement Monday.
Stollery launched its fake crypto offering in January 2018, according to the DOJ. The Securities and Exchange Commission previously sued Stollery and his company and won a judgment that will return at least some of the money to defrauded investors.
The DOJ said Stollery enticed investors to buy the company’s cryptocurrency “through a series of false and misleading statements.” Stollery “admitted that he did not use the invested money as promised, but instead commingled the ICO investors’ funds with his personal funds, using at least a portion of the offering proceeds for expenses unrelated to TBIS, such as credit card payments and paying bills for Stollery’s Hawaii condominium,” according to the DOJ press release.
The press release also states:
Stollery admitted that, in order to lure investors, he falsified aspects of TBIS’ white papers, which allegedly provided investors and potential investors with an explanation of the cryptocurrency investment offering, including the purpose and technology behind the offering, how the offering differed from other cryptocurrency opportunities, and the prospects for the offering’s profitability. Stollery also planted false customer testimonials on TBIS’s website and falsely claimed he had business relationships with the Federal Reserve and dozens of prominent companies to create a false impression of legitimacy.
The criminal case is sealed, but a court filing with the DOJ’s allegations, filed in May 2022, is available here.
The crypto token “had no functionality”
Titanium sold a utility token called “BAR”, but the token “had no functionality at the time of the ICO [initial coin offering]”, the DOJ claimed.
As Cointelegraph explains, “a utility token is a special type of cryptographic asset that is primarily aimed at raising the funds necessary to develop a cryptocurrency project.” Utility tokens “do not represent any ownership interest in the project invested in” but “allow the holder to buy or sell the underlying tokens on a preferential basis,” and “can generate profits for the token acquirer if the project ends up achieving its intended purpose of reasonable success.”
Stollery “promoted TBIS as an investment and emphasized that holders of BAR would share in TBIS’s future earnings and in the appreciation of the value of BAR’s digital assets,” the DOJ said. He also compared investing in TBIS to buying Google stock when it was only $75 per share, the DOJ said.
Stollery also ran a technology consultancy called EHI and claimed in white papers that Titanium Blockchain “will simply inherit EHI’s clientele.” Stollery claimed his clients included Accenture, Apple, Boeing, Cargill, Citizens Bank, eBay, General Electric, HP, Honeywell, IBM, Intel, Microsoft, PayPal, Pfizer, Synchrony Financial, Federal Reserve Bank, Royal Bank of Scotland, Universal Studios , Disney and others.
“As a result of the fraudulent scheme … Defendant Stollery obtained approximately $21 million in various digital assets, such as Ether and Bitcoin, and cash from dozens of investors located in at least 18 states, including California, and overseas, which bought BAR,” the DOJ said.
Before announcing the ICO, Stollery used social media to hype Titanium Blockchain as “a start-up company seeking to develop an IT platform using blockchain technology,” the DOJ said. “On its various social media accounts, TBIS’s profile contained some variation of the following marketing message: ‘Just as steel changed the construction industry forever, Titanium will usher in a new era of networking, based on blockchain technology.’
