A Securities and Exchange Commission (SEC) lawsuit filed in the Eastern District of Michigan on Wednesday took aim at several individuals and entities in connection with an alleged blockhain scheme.
The complaint said that to enrich themselves, the five individual defendants defrauded tens of thousands of retail investors with promises of extraordinary returns on investment in CoinDeal, touted as a unique blockchain technology they were told would soon sell for trillions to reputable billionaire buyers. CoinDeal’s website describes it as a cryptocurrency exchange.
The complaint names Neil Chandran, a “recidivist securities law violator and convicted felon” who is currently imprisoned in Nebraska awaiting trial, as a defendant. The filing says that given Chandran’s criminal record, he recruited others to help persuade largely unsophisticated retail investors to underwrite CoinDeal by selling unregistered securities until the alleged sale could occur and yield extremely high returns.
Others involved in the scheme were Garry Davidson, Linda Knott, Michael Glaspie, and Amy Mossel, the latter two of whom are married. Previously, Davidson, Knott, and Glaspie received cease-and-desist warnings, some of which resulted in monetary settlements, from Alabama and Michigan regulators over their involvement with CoinDeal on the basis that they were selling unregistered securities.
According to the complaint, the defendants including Glaspie, an online promoter, raised huge sums for CoinDeal from investors in multiple states and countries. The complaint alleges that all the defendants knew or were reckless in their dissemination of false information to investors about the supposed value and timeline of the sale transaction and the purported involvement of prominent business people, financial institutions and governmental departments or agencies.
Further, when the SEC followed the money trail, it discovered that several defendants did not transfer all CoinDeal investor funds upstream. Instead, four of the five defendants diverted investor funds for personal use along the way. The SEC levels multiple charges against each defendant, except Mossel and a company she controlled, who are only charged with aiding and abetting Glaspie’s violations.
The agency seeks disgorgement, civil penalties, officer and director bars, permanent injunctions, and conduct-based injunctions stemming from the defendants’ wrongdoing. In a parallel proceeding, the Department of Justice indicted Chandran on three counts of wire fraud and two counts of monetary transaction in unlawful proceeds for his involvement in CoinDeal in June 2022.