SEC takes GexCrypto, founder to Court
The Securities and Exchange Commission (SEC) has brought charges against GexCrypto and its founder Emiliano “Emil” Ryn.
The SEC filed a complaint against GexCrypto and its founder on February 6, 2023 at the Nevada District Court.
The complaint alleges that, between October 2017 and July 2018, Ryn defrauded 26 investors out of more than $800,000 in an investment scheme primarily targeted at elderly and technologically unsophisticated individuals in the expatriate Filipino community in California.
Ryn presented himself as a successful Filipino entrepreneur in the cryptocurrency space, wearing a Rolex watch and driving a Maserati. He positioned himself as someone who would purportedly help members of his community also become rich through GexCrypto Corp, a purported first-of-its kind crypto asset trading platform, and via a purported separate crypto asset mining operation established by Ryn.
Deceived by Ryn and his fraudulent promises of guaranteed investment returns, investors turned over their life savings in cash to Ryn, with some even taking out home equity loans to invest with him.
The first part of Ryn’s scheme involved the formation of GexCrypto, purportedly to launch a crypto asset trading platform. Ryn falsely represented to investors the superiority of the GexCrypto trading platform’s technology and its one- of-a-kind customer service. He did this through, among other ways, a professionally- produced video available on GexCrypto’s website and other statements on GexCrypto’s website.
In reality, GexCrypto was never operational and the descriptions of GexCrypto provided to investors were nothing more than Ryn’s aspirations.
To raise money purportedly to support and develop further GexCrypto’s trading platform, Ryn, through GexCrypto, conducted an initial coin offering (ICO) of GexCoins. The ICO was advertised publicly on GexCrypto’s website and social media. The ICO was also promoted directly by Ryn to individual investors. Ryn and GexCrypto made the same material misrepresentations about GexCrypto’s existing operations in marketing and advertising the ICO and guaranteed outsized returns to investors despite the non-existent trading platform.
At the same time Ryn recruited investors for GexCrypto, he offered many of those same individuals the opportunity to invest in a purported crypto asset mining business in which Ryn would pool investor funds to purchase mining equipment and pay investors returns based upon the amount of crypto assets mined.
Several of Ryn’s investors invested in GexCrypto, GexCoin, and the Mining Operation. Ryn promised mining investors guaranteed outsized returns and repeatedly lied to investors about the mining business’s operations.
None of Ryn’s false promises materialized. No investment returns were ever paid, and investors lost their entire investments.
As investors began to press Ryn about their promised returns and the businesses’ operations, Ryn engaged in additional fraudulent lulling conduct by making additional misstatements to investors. Among other things, Ryn: (1) created and distributed a second worthless digital token to investors, which he falsely passed off as a GexCoin; (2) falsely told investors he was in the Philippines to register GexCrypto with the Philippine regulators; and (3) provided two investors with a fraudulent bank statement purportedly showing that payment of their promised distributions was imminent. Ultimately, Ryn halted all communications with investors.
The investments Ryn offered and sold to investors in GexCrypto, GexCoins, and the Mining Operation were securities.
Ryn did not register any of his offers or sales of GexCrypto or GexCoins with the Commission, no registration statement was in effect as to any offer or sale of GexCrypto or GexCoin, and no exemption from registration applied.
The SEC alleges that the defendants violated Section 5 of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. § 77e; Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a); and Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), 17 C.F.R. § 240.10b-5.
The regulator seeks a Court order: (i) permanently restraining and enjoining Defendants from violating the federal securities laws, and permanently restraining and enjoining Ryn from engaging in certain further conduct; (ii) prohibiting Ryn from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act; (iii) directing Defendants to pay on a joint and several basis disgorgement and prejudgment interest thereon; and (iv) directing Defendants to jointly and severally pay a civil money penalty.