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Investors that took part in convicted SA entrepreneur Eran Eyal’s $42.5-million Shopin initial coin offering (ICO) are up in arms over a US court’s final judgement of the Securities and Exchange Commission’s (SEC) case against him.
They describe the judgement, which was handed down last Friday (19 June) by District Judge Louis L Stanton in the New York Southern District Court on Friday (19 June), as “ridiculous” and a “joke” and say it amounts to nothing more than slap on the wrist for the convicted entrepreneur.
Eyal, 45, who has joint Israeli-SA citizenship, was convicted in December last year of operating a series of three securities fraud schemes, including the ICO of his cryptocurrency startup Shopin (see this story) as well as Passo and Springleap.
Shopin investors have called the court’s judgement in the SEC case against convicted fraudster Eran Eyal ‘ridiculous’ and a ‘joke’
In December last year, the SEC charged Eyal, founder of UnitedData Inc, which traded as Shopin, of operating a fraudulent unregistered securities offering from August 2017 to April 2018 by selling Shopin tokens in an ICO.
He was deported from the US to Israel on 18 May, after being held in a New Jersey prison facility by the US’s Immigration and Customs Enforcement’s (ICE) since February (see this story).
In the SEC’s final judgment, Eyal was found liable to repay investors a sum of $422 100, which represented the profits gained as a result of the fraudulent conduct alleged in the SEC’s complaint.
With the addition of interest levied of the amount of $34 940, the total came to $457 040.
However, Eyal was deemed to have satisfied payment, by having given up 3105.78 Ether tokens pursuant to his plea agreement which secured his conviction in December last year.
As part of the court’s judgement in the SEC case, Eyal — as well as former Shopin employees, agents and employees served with the judgement — are also prohibited from acting as an officer or director of any issuer that has a class of securities registered under Section 12 of the US’s Exchange Act.
Eyal is also prohibited from engaging in any offering of digital asset securities.
Shopin investors shocked
However, the judgement has shocked Shopin investors who took to secure messaging service Telegram to vent their frustration on a channel for aggrieved investors that took part in the ICO.
One investor called “Bazzie” said on 19 June: “So he can use investor funds to settle his own personal liabilities and the SEC and AG even agree with that. Outrageous”.
Said another investor called “Mario” on 20 June: “What a joke? You rob someone and they let you pay a fine with some of the money you stole”.
Added “Mike”: “The worst part is that he’s been punished more than any other crypto scammer I’m personally aware of. The STK and Gladius teams got off Scot-free.”
‘Misappropriated funds for personal use’
The SEC in its complaint (opens as a PDF) lodged in December last year said Shopin aimed to use the funds from the sales of the Shopin Tokens to create universal shopper profiles, maintained on the blockchain, that would track customer purchase histories across online retailers and recommend products based on this information. As alleged in the SEC’s complaint, Shopin never created a functional platform.
The complaint further alleges that Eyal and Shopin repeatedly lied to investors in connection with its offering, including misrepresentations about purported partnerships with certain well-known retailers and about the involvement of a prominent entrepreneur in the digital-asset space.
The SEC also alleges that Eyal misappropriated investor funds for his personal use, including at least $500 000 used for rent, shopping, entertainment expenses and a dating service.
While Eyal was deported to Israel last month, one former Shopin employee told Ventureburn that he may well be in the UK.
The former Shopin employee showed Ventureburn a video of his DropBox Business account which indicated that Eyal had removed him from a Dropbox folder on the evening of 27 May, from Lambeth, a district in London.
In addition, his US girlfriend, professional speaker Jennifer K Hill, was in London just after the time Eyal was deported, going on her Facebook posts. She still listed herself as being in London as recently as last Saturday (20 June)
Despite the coronavirus pandemic having resulted in travel having shut down in a number of countries, a check by Ventureburn indicated that was possible in May to get a flight from Israel to the UK.
But wherever he may be, when will he be back in South Africa?
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Featured image: Former Shopin and Springleap founder Eran Eyal (Facebook)