SEC Can Target Sale of ‘Gold-Backed’ Crypto as Securities Fraud

Three participants in an alleged $37 million pump-and-dump scheme offering cryptocurrency purportedly backed by gold will continue to face SEC fraud charges after a federal court ruled against them.

The Securities and Exchange Commission adequately alleged that the entire enterprise constituted an “investment contract” offering securities, Judge Beth Bloom said Wednesday for the US District Court for the Southern District of Florida.

The SEC alleges that a company called Cryptobontix Inc. developed a digital asset, “Dignity” or “DIG.” Together with Arbitrade Ltd., it advertised the tokens as backed by gold bullion. Cryptobontix and Arbitrade arranged with another company to obtain ...