A U.S. judge shared some concern for Robert B. Ladd, CEO of Bitcoin mining company MGT Capital Investments, over a suspected pump-and-dump scam worth $27m.
District Judge Edgardo Ramos said the SEC had refused to provide enough evidence that Ladd had violated securities laws. The Commission had, however, successfully demonstrated MGT Capital Investments role in "helping and promoting" the scheme.
The Case Against Ladd
Judge Ramos ruled out SEC allegations that Ladd breached securities laws because he had not disclosed the presence of a small group of investors who collectively owned more than 5 percent of his Bitcoin mining business.
Despite having engineered the $27 million dumping scam between MGT and two other firms, the Judge said Ladd had no obligation under existing regulations to reveal specifics of stock ownership.
He concluded, however, that Ladd was overly involved in the scheme by revealing a long history between himself and the investor group. This included suing MGT writers for false reporting.
Judge Ramos also noted there as ample evidence to indicate the MGT CEO deceived investors when John McAfee was hired.
In May 2016, Ladd revealed that MGT were considering appointing McAfee as CEO after agreeing to buy one of his firms.
Pump and Dump Scam
In Sept. 2018, Ladd was accused by the SEC of participating in a pump-and-dump scam organized by one of the Riot Blockchain key shareholders, Barry Honig.
According to the SEC, Honig, together with John O'Rourke, CEO of Riot Blockchain, and shareholders John Stetson and Michael Brauser, operated a multiyear scheme between 2013 and 2018 to manipulate the stock prices of three microcap firms.
They inflated prices to a whopping $27 million by buying shares in companies at low prices and then paying authors and influencers to promote it before dumping their stock at an inflated price, leaving investors with virtually worthless shares.
Ladd maintains his innocence and alleges he has been lumped in with the other co-defendants. He disputes the SECs claims that he was involved with the investor group, or that he knowingly partook in misleading promotions and sold inflated stocks.
Although Judge Ramos was sympathetic to some of Ladd's claims, he concluded that Ladd was liable for aiding and abetting the scheme due to his participation in paid promotions. Ramos also ruled that Ladd had breached the securities law by misleading investors over the McAfee announcement.
The case is ongoing and while Ladd will certainly be held accountable for his actions, it is widely expected that the $27 million lawsuit against him will be reduced.