Titanium Blockchain boss convicted of $21 million fraud
The CEO behind a fake cryptocurrency initial coin offering has pleaded guilty in US federal court to securities fraud in a scheme in which $21 million was stolen.
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Michael Alan Stollery, 54, defrauded investors by raising money for Titanium Blockchain Infrastructure Services, a purported cryptocurrency investment platform he founded. Stollery risks up to 20 years in prison.
Stollery’s initial coin offering – the cryptocurrency equivalent of an IPO – was reportedly to raise money to build out TBIS services as network infrastructure. Stollery, who also goes by “Michael Stollaire,” instead used about $50,000 of the investors’ money to pay off credit card debt and spent additional money on bills related to his Hawaii condo.
The stolen funds included digital assets, such as Ether and Bitcoin, and cash from dozens of investors located in at least 18 states and abroad who bought the TBIS token called “BAR,” federal prosecutors wrote in a criminal complaint earlier this year. Stollery conducted and announced the ICO between November 2017 and May 2018.
Stollery also did not register the ICO with the Securities and Exchange Commission. All ICOs and cryptocurrency investment opportunities that qualify as securities or investment vehicles must be registered with the SEC. In May 2018, the agency obtained a federal court order halting the ICO and freezing Stollery’s and TBIS’s assets.
The agency told the court that Stollery lied about its business in the marketing materials and white paper accompanying the ICO, claiming slogans such as “Company as a Service™” and “Mining as a Service™.”
“Just as steel changed the construction industry forever, Titanium will usher in a new era of networking, based on blockchain technology,” Stollery said on social media, which he used frequently, the 2018 SEC complaint shows. His campaign included self-produced YouTube videos, paid interviews, online Facebook ads and “productive tweets.”
“This ICO was based on a social media marketing blitz that allegedly deceived investors with purely fictitious claims about business prospects,” said Robert A. Cohen, then-chief of the SEC Enforcement Division’s cyber unit.
To add legitimacy, Stollery planted fake customer testimonials on TBIS’s website, falsely claiming he had business dealings with the Federal Reserve and “dozens of prominent companies,” including Apple, Boeing, eBay, General Electric, Microsoft, PayPal, Pfizer, Royal Bank of Scotland, Universal Studios and Walt Disney. The TBIS website currently lists a court notice of the allegations against Stollery, and TBIS social media accounts appear to have been deleted.
Crypto Scammers Beware
Stollery’s conviction marks the latest in a series of actions by the Justice Department to crack down on cryptocurrency fraud. The DOJ’s cryptocurrency fraud unit says that since 2019 it has prosecuted cases involving over $2 billion in stolen investor money.
Each conviction sends a message to cryptocurrency fraudsters and fraudsters that law enforcement has the tools to deal with Web3 criminal activity, said William Callahan, director of government and strategic affairs at Blockchain Intelligence Group.
Justice has come a long way, he says. “While overseeing the Midwest narcotics effort as Special Agent in Charge of the U.S. Drug Enforcement Administration’s St. Louis Division [between 2018 and 2020], we had one or two investigators or analysts familiar with cryptocurrency and blockchain financial research. Now, these offices across the country have teams dedicated to identifying and disrupting cyber criminals, Callahan told the Information Security Media Group.
The spate of recent enforcement actions by the Department of Justice does not imply an increase in cryptocurrency-related attacks now, says Ari Redbord, head of legal and government affairs at blockchain intelligence firm TRM Labs (see: Cryptocurrency Insider Trading, Fraud in the Fed’s Crosshairs).
“While it may feel like there is a rash of scams and fraud at the moment, what we are actually seeing are successful prosecutions that have been going on for some time. Most of these are not new cases, but rather the fruit of actions taken by the department since the creation of the DOJ Enforcement Framework nearly two years ago, he says.Justice in October 2020 released the framework as part of an effort to state its approach to cryptocurrency.
In 2021, the department also established the National Cryptocurrency Enforcement Team.
