SEC Obtains Settlement Against Dropil in Unregistered ICO Case

The US Securities and Exchange Commission(SEC) announced on Friday that it had obtained partial consent judgments against three individuals and a company accused of defrauding investors with an unregistered initial coin offering(ICO). According to the press release issued by SEC, the company Dropil and its founders Jeremy McAlpine, Zachary Matar, and Patrick O’Hara were accused of raising $1.8 million from thousands of investors through a fraudulent ICO.

SEC Filed a Complaint Against Dropil ICO Founders in 2020

The SEC had charged the founders of Dropil with fraud in a complaint filed in April 2020. This complaint pertained to the funds raised by the company between January and March 2018.  During this period, Dropil sold DROP tokens claiming that the funds generated would be used to trade other digital assets by its algorithmic trading bot “Dex.”

However, the ICO funding raised by the company was funneled by its founders into their personal accounts, while they fabricated profitability reports for Dex. The SEC said in its complaint that “There is no record that Dex, which Dropil promoted as a differentiating feature of DROPs, ever operated or generated any trading profits.”

Additionally, the SEC claimed that Dropil misled investors by misrepresenting the volume and dollar value of DROP tokens sold before and after the ICO. The securities regulator also asserted that Dropil operated an unregistered ICO by selling DROP tokens. What’s more, the company is also accused of falsifying evidence and testimony during the investigation. 

Dropil Founders Agree to Bifurcated Settlements

Dropil Inc., McAlpine, Matar, and O’Hara have agreed to bifurcated settlements that permanently ban them from participating in the offer, purchase, or sale of digital securities. They were charged under the registration provisions and anti-fraud provisions of the Securities Act.

The court is yet to determine the terms of civil penalties, settlements, disgorgement, and prejudgment interest for Dropil’s founders. While Dropil, McAlpine, and Matar’s settlements are pending court approval; O’Hara’s settlement was previously approved in June. 

Meanwhile, in a separate proceeding conducted by the U.S. Attorney’s Office for the Central District of California, McAlpine and Matar plead guilty to the charges brought against them.