British entrepreneur Renwick Haddow was charged with securities fraud by the US Securities and Exchange Commission for operating a fake bitcoin trading platform that was utilized to deceive investors and scam them of hundreds of thousands of dollars.
Since 2015, Haddow operated two “trendy” companies including a bitcoin trading platform called Bitcoin Store and a flexible workspace firm Bar Works. According to the official report of the SEC, Haddow deceived his investors in both companies by promising high returns then ultimately diverted company funds into two separate bank accounts in Mauritius and Morocco.
SEC New York director Andrew Calamari stated:
“Haddow created two trendy companies and misled investors into believing that highly qualified executives were leading them to quick profitability. In reality, Haddow controlled the companies from behind the scenes, and they were far from profitable.”
In essence, the legal conflict between Haddow’s businesses and the SEC’s regulatory frameworks does not involve bitcoin and cryptocurrencies. Initially, the SEC investigated into Haddow’s two businesses due to multi-million dollar transfers that did not reflect actual sales and direct revenues from customers of Haddow’s businesses.
In particular, the SEC revealed that Bitcoin Store, which according to Haddow has generated several million dollars in gross sales by providing a secure way of holding and trading bitcoin, never generated any revenue and did not even have an active user base.
Haddow deceived investors to raise hundreds of thousands of dollars in funding with the sole intention of diverting those funds to overseas bank accounts.
A report published by Crain’s New York Business further revealed that the SEC conducted a full investigation into Haddow’s supposed bitcoin enterprise and Bar Works after 27 investors in China filed a lawsuit against Haddow to repay $3 million invested in the flexible workspace.
Investors alleged Bar Works of being a ponzi scheme and that Haddow raised more than $37 million for a non-existent business. An SEC investigation also noted that Haddow did not provide workspaces to bars and individuals but instead “primarily sold leases coupled with sub-leases that together functioned like investment notes.”
As interest and demand toward bitcoin for individual and institutional investors began to increase at a rapid rate in US and internationally, financial regulators within the US started to regulate the cryptocurrency sector and its businesses strictly.
Several states such as New York have established a licensing program for bitcoin and cryptocurrency startups which require companies to obtain a license from the New York State Department o f Financial Services and maintain strict KYC and AML systems.
Intensified regulation on the bitcoin industry have led to the crackdown of fraudulent businesses such as Haddow’s Bitcoin Store and allowed the public to adopt bitcoin as a digital currency and safe haven asset.
Efficient and appropriate regulation of the bitcoin industry and exchange market is necessary for bitcoin to evolve into an international digital currency and alternative financial network to the global banking industry.
Even regions such as Russia that are still yet to fully regulate bitcoin are seeing an explosive increase in the demand for bitcoin. In fact, prominent fine dining restaurant Valenok, a flagship restaurant of Moscow-based Novikov Group, recently became the first merchant in Russia to publicly accept bitcoin as a payment method.
"We want to keep pace with the time. If there is a demand from guests for payment with bitcoin, we will even install special ATMs to exchange bitcoins for providing the proper level of service to our guests. The restaurant generates a QR code containing the desired amount and address of his purse. Then, the client scans this QR code using his bitcoin application on a smartphone and makes payment,” said Valenok spokesman Mikhail Petukhov.
Source: https://btcmanager.com/british-broker-charged-for-multi-million-dollar-bitcoin-scam-in-us/