SEC warns Meta 1 Coin scheme is ongoing despite Court orders
The United States Securities and Exchange Commission (SEC) has warned that Meta 1 Coin Trust (“Meta1”) continues to operate regardless of the Court’s orders to halt the fraudulent scheme. This becomes clear from the latest status report filed by the regulator with the Texas Western District Court.
Let’s recall that the SEC launched this case on March 16, 2020. The SEC’s complaint alleges that Florida residents Robert Dunlap and Nicole Bowdler marketed and sold a purported digital asset called the “Meta 1 Coin” in an unregistered securities offering, conducted through the Meta 1 Coin Trust.
The complaint alleges that the defendants made numerous false and misleading statements to potential and actual investors, including claims that the Meta 1 Coin was backed by a $1 billion art collection or $2 billion of gold, and that an accounting firm was auditing the gold assets. The defendants also allegedly told investors that the Meta 1 Coin was risk-free, would never lose value and could return up to 224,923%.
According to the complaint, the defendants never distributed the Meta 1 Coins and instead used investor funds to pay personal expenses and to funnel proceeds to two others, Pramana Capital Inc. and Peter K. Shamoun. The complaint alleges the defendants raised more than $4.3 million from more than 150 investors in and outside the U.S.
The SEC’s complaint charges the Meta 1 Coin Trust, Dunlap, Bowdler, and Schmidt with violating antifraud and securities registration provisions of the federal securities laws.
According to the latest status report filed by the SEC earlier this week, the fraudulent scheme is ongoing. Meta1 continues to solicit new investors, and the defendants and others acting at Dunlap’s direction continue to actively promote the Coin.
The regulator says that, in contempt of the Court’s Orders, the defendants’ website is still operational at https://meta1.io. Moreover, Meta1 regularly communicates with investors and prospective investors via emailed “newsletters,” Zoom call presentations, and false and misleading press releases touted to the email subscribers.
In violation of the asset freeze and other orders, the defendants continue to accept investor funds and funnel them to sources unrelated to the purpose of the offering, among other things.
For example, on February 25, 2021, Meta1 issued a newsletter sent via email blast to its subscriber list, which linked to a “Revised META1 Whitepaper [Whitepaper],” on its website. In that document, Meta1 again claims to be above the law, stating:
“META 1 operates within a private trust in a “Private Jurisdiction.” This means that META 1 Coin is not within a State or Federal jurisdiction and it does not accept contract attempts from such parties. Government agencies and their attempts at defaming and stopping the advent of private digital assets have no legal bearing on META 1. This allows META 1 to operate without the interference of such agencies”.
Dunlap now claims that the Coin is backed by “$8.8 Billion [up from the previous claim of $2 billion] in gold reserves and other assets.”
The SEC says it is working to uncover the on-going deceptive conduct, trace the flow of funds, and quantify the investor money that the defendants are continuing to raise and misappropriate. The regulator requests additional time to gather evidence and prepare a motion for monetary remedies that adequately represents the extent of the ill-gotten gains and the need for maximum penalties.
The Court has granted the SEC’s request. The regulator is set to update the Court on these matters on or before July 1, 2021.