SEC sues crypto platform Unicoin over alleged fraud

The US Securities and Exchange Commission (SEC) has filed a lawsuit against the crypto company Unicoin and three of its top executives

The US Securities and Exchange Commission (SEC) has sued crypto platform Unicoin and three of its executives for allegedly defrauding more than 5,000 investors and raising over $100 million.

The regulator named CEO Alex Konanykhin, board member Silvina Moschini and former investment head Alex Dominguez in the complaint filed on Monday.

The SEC said Unicoin sold more than $3 billion in certificates that entitled it to future Unicoin tokens and shares without registering the offerings as required by federal securities laws. The company also claimed the tokens were registered with the SEC, which was false.

Unicoin claimed its tokens were backed by billions of dollars in real estate holdings worldwide, but these assets were worth only a fraction of what was claimed, the regulator said.

The company also claimed to have a financial cushion of decades, but at times it had only four months of operating funds.

Konanykhin has strongly denied the allegations, accusing the SEC of politicizing regulations. He said he will not settle and plans to challenge the matter in court.

Konanykhin is also considering filing a counterclaim against the SEC for alleged damages of billions of dollars to the company and its investors, his lawyer Dmitry Karpovsky told Reuters.

The complaint follows a report by the law firm Cleary Gottlieb on behalf of Unicoin creditors, which had threatened to sue the company if it did not pay back the loans.

The creditors said they loaned $530 million to Unicoin, which was used to provide short-term credit to retail investors.

Unicoin, which went bankrupt in 2023, borrowed the money at interest rates of up to 18%, while paying interest of 10% to 12% to investors. The report said the creditors' claims were valid and urgent.

Unicoin was founded in 2018 by Konanykhin, a Russian-American billionaire who made his fortune in real estate and technology.

The company's mission was to create a "decentralized and distributed" financial system that would be accessible to everyone.

Unicoin's tokens were sold in a private placement to accredited investors, who were told that the tokens would be backed by a portfolio of commercial and residential real estate in major cities around the world.

The company's business model was to use the tokens to provide loans to small and medium-sized enterprises (SMEs), which would generate interest income that would be paid to token holders.

Unicoin also planned to launch a credit card and other financial products that would be powered by its tokens.

However, the company's plans were derailed by a series of legal and financial challenges.

In 2020, Unicoin was sued by a group of investors who claimed they were defrauded by the company's sales practices.

The lawsuit was settled out of court, but it put a strain on Unicoin's finances.

The company was also forced to postpone its token offering several times due to market volatility and regulatory scrutiny.

Ultimately, Unicoin's founders decided to wind down the company and return remaining funds to creditors.

The company's bankruptcy proceedings are still ongoing.