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The CEO of an alleged cryptocurrency investment firm has pleaded guilty to his role in a crypto fraud scheme that raised $21 million from investors, the Justice Department said.
Michael Alan Stollery (aka “Michael Stollaire”), 54, was CEO and founder of California-based company Titanium Blockchain Infrastructure Services (TBIS). He pleaded guilty on Friday to one count of securities fraud in U.S. District Court for the Central District of California and faces up to 20 years in prison when he is sentenced in November, according to a Announcement from the Ministry of Justice on Monday.
Stollery launched its 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 tricked investors into buying 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 rather mixed the ICO investors’ funds with his personal funds, using at least some of the proceeds from the offering for unrelated expenses. to TBIS, such as credit card payments and bill payments for the Stollery Hawaii condo,” according to the DOJ press release.
The press release also said:
Stollery admitted that in order to attract investors, he falsified certain aspects of TBIS white papers, which offered investors and potential investors an explanation of the cryptocurrency investment offering, including purpose and technology. behind the offer, how the offer was different from other cryptocurrency opportunities, and the prospects for profitability of the offer. Stollery also planted fake customer testimonials on the TBIS website and falsely claimed he had business relationships with the Federal Reserve and dozens of top companies to create a false appearance of legitimacy.
The criminal case is sealed, but a court filing containing the DOJ allegations, filed in May 2022, is available here.
Crypto token “had no functionality”
Titanium sold a utility token called “BAR”, but the token “had no functionality at the time of the ICO [initial coin offering]“, alleged the DOJ.
Like Cointelegraph Explain, “a utility token is a special type of crypto asset that primarily aims to raise the necessary funds to develop a cryptocurrency project.” Utility tokens “do not represent any stake in the project they are investing in” but “allow the holder to buy or sell the underlying tokens on a preferential basis” and “may generate profits for the acquirer of the token if the project ends up serving its intended purpose with reasonable success.”
Stollery “promoted TBIS as an investment and emphasized that holders of BAR would share in future profits from TBIS and appreciation in the value of BAR’s digital assets,” the DOJ said. He also compared the investment in TBIS to buying Google stock when it was just $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 “just inherit EHI’s customer base.” Stollery said his clients include Accenture, Apple, Boeing, Cargill, Citizens Bank, eBay, General Electric, HP, Honeywell, IBM, Intel, Microsoft, PayPal, Pfizer, Synchrony Financial, Federal Reserve Bank, Royal Bank of Scotland , Universal Studios, Disney and others.
“As a result of the fraudulent scheme … defendant Stollery obtained approximately $21 million in the form of various digital assets, such as Ether and Bitcoin, and money from dozens of investors located in at least 18 states, including California, and abroad, which purchased BAR,” the DOJ said.
Prior to announcing the ICO, Stollery took to social media to introduce Titanium Blockchain as “a startup seeking to develop a computing platform using blockchain technology,” the DOJ said. “On its various social media accounts, TBIS’ profile contained a variant of the following marketing message: ‘Just as steel changed the construction industry forever, Titanium will usher in a new era of building networks, based on blockchain technology. “”