SEC

SEC imposes cease-and-desist order and a $25,000 fine on defunct crypto investment firm NextBlock

May 15, 2019, 7:54AM EDT

The U.S. Securities and Exchange Commission (SEC) has imposed a cease-and-desist order on Canada-based crypto investment firm NextBlock Global for violating securities law. Its CEO and blockchain author Alex Tapscott also received a $25,000 penalty.

The company, which once made plans to list on the Toronto Stock Exchange but is now winding up its operations, also agreed to pay a $700,000 CAD (approximately $520,000) administrative penalty as part of its agreement with the Ontario Securities Commission.

According to the SEC, the company had been offering securities to U.S. investors despite “neither NextBlock nor its securities [having] ever been registered with the Commission in any capacity." The company also reportedly falsely advertised to investors that four “prominent” figures in the blockchain industry were serving as its advisors.

In 2017, NextBlock raised $20 million CAD (then approximately $16 million) in a convertible debenture offering, with approximately $2.4 million procured from U.S. investors. NextBlock invested the proceeds in digital assets, with Tapscott entitled to a share of any profit generated. The firm later planned a second fundraising round but abandoned it amid the misconduct reports. It has since agreed to liquidate its crypto holdings and return the funds plus profits to investors. 

Since the company has “promptly undertaken” remedial acts, the SEC said it had decided against imposing a further civil penalty.