Crypto Opinions & News CEO Sold Worthless Crypto Tokens and Used Proceeds for Hawaii Condo, DOJ says

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https://arstechnica.com/tech-policy/2022/07/ceo-who-sold-worthless-cryptocurrency-pleads-guilty-in-21-million-fraud-case/

The CEO of a purported cryptocurrency investment company pleaded guilty for his role in a crypto fraud scheme that raised $21 million from investors, the Department of Justice said.

Michael Alan Stollery (aka "Michael Stollaire"), 54, was CEO and founder of the California-based Titanium Blockchain Infrastructure Services (TBIS). He pleaded guilty Friday to one count of securities fraud in US District Court for the Central District of California and faces up to 20 years in prison at his scheduled sentencing in November, according to a Department of Justice announcement Monday.

Stollery launched his fraudulent crypto offering in January 2018, according to the DOJ. The Securities and Exchange Commission previously sued Stollery and his company and won a judgment that will return at least some of the money to defrauded investors. The DOJ said Stollery lured investors to purchase his company's cryptocurrency "through a series of false and misleading statements." Stollery "admitted that he did not use the invested money as promised but instead commingled the ICO investors' funds with his personal funds, using at least a portion of the offering proceeds for expenses unrelated to TBIS, such as credit card payments and the payment of bills for Stollery's Hawaii condominium," according to the DOJ press release.

Titanium sold a utility token called a "BAR," but the token "did not have any functionality at the time of the ICO [initial coin offering]," the DOJ alleged. As Cointelegraph explains, "a utility token is a special type of cryptographic asset that is primarily aimed at garnering the funds necessary to develop a cryptocurrency project." Utility tokens "do not represent any ownership stake in the project being invested in" but "allow the holder to buy or sell the underlying tokens on a preferential basis," and "may generate profits for the token acquirer if the project ends up reaching its intended purpose with reasonable success."

Stollery "promoted TBIS as an investment and emphasized that holders of BAR would share in TBIS's future earnings and in appreciation in the value of the BAR digital assets," the DOJ said. He also compared investing in TBIS to purchasing Google stock when it was only $75 a share, the DOJ said. Stollery also ran a technology consulting services company called EHI and claimed in white papers that Titanium Blockchain "will simply inherit EHI's clientele." Stollery claimed his clients included Accenture, Apple, Boeing, Cargill, Citizens Bank, eBay, General Electric, HP, Honeywell, IBM, Intel, Microsoft, PayPal, Pfizer, Synchrony Financial, the Federal Reserve Bank, the Royal Bank of Scotland, Universal Studios, Disney, and others.

CEO sold worthless crypto tokens and used proceeds for Hawaii condo, DOJ says

Man pleads guilty, DOJ said his crypto token "did not have any functionality."

arstechnica.com