On October 9, the New York attorney general announced a settlement resolving the state’s 2023 lawsuit against the former CEO of a cryptocurrency lending platform. The settlement secures up to $35 million in contingent payments and permanently bars him from the securities, commodities and cryptocurrency industries. The lawsuit alleged that the former CEO “engaged in a scheme to defraud” through material misstatements and omissions made in offering and selling the platform’s interest-bearing accounts and its proprietary token. It also alleged that the former CEO sold securities and commodities without registering with the state, in violation of New York’s Martin Act and Executive Law § 63(12). The former CEO pleaded guilty to commodities fraud and to a scheme to manipulate the token’s price in a parallel SDNY criminal case. In the stipulation, he admitted to violating the Martin Act and Executive Law § 63(12) through false and misleading statements about the platform’s “approval by regulators” and about his own token sales. As previously covered by InfoBytes, federal agencies brought parallel actions against the platform and the former CEO in July 2023, and in April the SDNY entered an order resolving the FTC’s claims against the former CEO (covered here).

Under the consent order, the former CEO must pay $25 million in damages, an obligation deemed satisfied if he pays $10 million to the DOJ under the criminal forfeiture order. A separate $10 million judgment is deemed satisfied once he completes his federal prison sentence, unless the sentence is overturned, reduced or shortened through early release. Other than personal trading, the order bars him from issuing, selling, promoting or advising on securities or commodities, “including cryptocurrency and digital assets,” and from working in such a business “in any other capacity.” He must also cooperate with the attorney general’s office and may not publicly deny the order’s findings. In any later proceeding by the attorney general, including a bankruptcy nondischargeability action, the complaint’s allegations will be “taken as true.”