NEW YORK (Reuters) - The chief executive of Shopin was charged on Wednesday by the U.S. Securities and Exchange Commission with defrauding investors in a $42.5 million initial coin offering by falsely telling them that his blockchain startup had close ties to major retailers and a Silicon Valley entrepreneur.
Eran Eyal, 44, a dual citizen of South Africa and Israel who lives in Brooklyn, New York, also pleaded guilty to criminal charges brought by the office of New York Attorney General Letitia James, the SEC said.
A lawyer for Eyal and Shopin did not immediately respond to requests for comment. Neither the SEC nor James’ office responded to similar requests. The SEC did not describe the criminal charges.
In its civil complaint against Eyal and Shopin, the SEC said Eyal promised investors who bought digital tokens that their money would go toward creating “universal shopper profiles” that would track customer purchases across online retailers and recommend products.
The regulator said Eyal falsely claimed that the platform had been tested successfully at Bed Bath & Beyond (BBBY.O) and Ermenegildo Zegna, and that Shopin received steady monthly payments through partnerships with several retailers.
It also said Shopin listed the Silicon Valley entrepreneur as an adviser for about four months after he asked them to stop.
Eyal, meanwhile, misappropriated some funds to pay for personal expenses such as rent, shopping, entertainment and a dating service, the SEC said.
The SEC is seeking to recoup ill-gotten gains and obtain other remedies. It did not identify the Silicon Valley entrepreneur.
According to the complaint, Shopin’s offering was conducted between August 2017 and April 2018 through a “pre-sale” of tokens to wealthy and other investors, and an initial coin offering to the general public.
Shopin’s legal name is UnitedData Inc, the SEC said.
The case was announced one day after SEC Chairman Jay Clayton told a U.S. Senate committee that the regulator is devoting “significant” resources to digital assets, in a approach meant to foster innovation and capital formation while protecting investors and markets.
In April, the SEC issued an “investor alert” warning people to beware of claims it had “approved” initial coin offerings.
Reporting by Jonathan Stempel; Editing by Cynthia Osterman