SEC obtains $10M final judgment against Meta 1 Coin

A North Carolina court has granted the US Securities and Exchange Commission’s motion for a default judgment against an initial coin offering (ICO) that bilked as much as $10 million out of investors excited by the possibilities of the fraud perpetrated by a former Washington state senator.

The securities regulators requested a default judgment against three companies and four individuals associated with Meta 1 Coin.

The SEC charged Robert Dunlap and Nicole Bowdler, who worked with former State Senator Dave Schmidt, with arranging an ICO scheme called “Meta 1 Coin” that touted lucrative investment returns. The SEC also charged the defendants with providing pool participants with false statements that misrepresented the ICO’s profitability claiming that it would yield a 224,923 percent profit in less than a year.

Schmidt served as a state senator in Washington from 2003 until his unsuccessful re-election campaign in 2006. No stranger to controversy, he was accused in 2011 with spending his campaign funds on personal use, including mortgage payments and associated fees for the condominium where he lived and ran the re-election operation. He also paid for travel to conferences not directly related to his campaign. Schmidt denied misusing any campaign dollars but was ultimately fined $10,000.

On top of SEC charges, prosecutors accused the ICO organizers of deploying elaborate tactics and numerous false statements, including that the Meta 1 Coin was backed by a $1 billion art collection, and it has appointed specialists who realize how to spot genuine artistic creations. The scam operatives further claimed that their token is backed by $2 billion of gold and that an accounting firm was auditing the gold assets.

Instead, they spent the pool’s monies to pay for their personal expenses, including a $215,000 Ferrari, cash withdrawals, hotel, casino and restaurant expenses, and payments for other personal items.

While the defendants rewarded investors for recruiting new participants, the SEC describes these entities as fledgling companies with little to no actual business operations and few prospects for profitable operations.

As explained in the order, the SEC also determined that Meta 1 Coin amounted to selling securities without filing a registration or qualifying for a registration exemption.

If convicted with wire fraud, each defendant could face up to 20 years in prison and a fine of $1 million while selling unregistered securities carries a maximum of five years in prison and a $250,000 fiscal penalty.

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