The US Securities and Exchange Commission (SEC) has stepped up its legal action against the cryptocurrency industry, filing a lawsuit against investment firm Touzi Capital and its founder, Eng Taing.
The SEC accused the company of running a more than $100 million fraud scheme involving unregistered securities and misappropriated investment funds.
SEC Files Lawsuit Against Touzi Capital For $115 Million Cryptocurrency Fraud
The SEC complaint, filed November 29, accuses Touzi Capital of defrauding more than 1,500 investors across the United States. From 2021 to early 2023, the company is said to have raised $95 million for cryptocurrency mining projects and $23 million for debt recovery projects.
However, the SEC alleges that these funds were misused and pooled into unrelated businesses for Taing’s personal gain.
“The defendants pooled investment funds among various businesses, some of which were unrelated to crypto asset mining, misusing the funds for Taing’s personal benefit, and deceived investors about the profitability of the business,” Commission denounce.
The SEC added that Touzi Capital promotes its investments as safe and highly profitable like savings accounts. However, these investments are speculative and depend on the risky activities of third parties.
The complaint also highlights how misleading the company’s statements about its Bitcoin mining business were. Touzi Capital promised profits through cheap energy contracts and advanced mining equipment, but fluctuating energy costs and equipment problems have undermined these assertions.
“In reality, Touzi Capital’s ‘break-even’ point in bitcoin mining is misleading, as this calculation excludes known factors. Furthermore, the energy costs for Touzi Capital’s crypto asset mining operations fluctuated widely, and they frequently experienced problems with their equipment,” the SEC added.
The SEC reports that Touzi Capital’s operations allegedly collapsed, leaving investors in the dark due to Taing’s lack of communication. In its response, the SEC seeks permanent injunctions, civil penalties and recovery of illegally obtained profits. The lawsuit also asks that Taing be barred from holding a leadership or director position in any company.
This legal action adds to the SEC’s aggressive enforcement record under Chairman Gary Gensler, who is expected to step down in January. In fiscal year 2024, the SEC filed 583 enforcement actions, collected a record $8.2 billion from fines and sanctions. Prominent cryptocurrency cases, including a $4.5 billion settlement from Terraform Labs, accounted for more than half of the year’s financial recovery.
