Veritaseum CEO Reggie Middleton has agreed to return $8 million the US Securities and Exchange Commission (SEC) said was fraudulently obtained during the company’s ICO in 2017/18. Middleton must also pay a $1 million civil penalty as well as almost $600,000 in interest and is prohibited from acting as an officer or director of any security-issuing body. The settlement follows the SEC’s emergency action in August to seize the money through bank accounts and Ethereum addresses, stating that it was made through “making material misrepresentations and omissions about the unregistered securities they offered”.
Seriousness of Middleton’s Activities Laid Bare
The fact that Middleton, Veritaseum, and the SEC have reached a settlement should not itself be a surprise as this has proved the most common outcome the various such cases that have cropped up this year, but the $1 million fine and the banning of Middleton from ever offering securities again shows the seriousness of the case against him. The SEC took action against Veritaseum and Middleton in August through the New York Eastern District Court, alleging that he and the other the Veritaseum founders “knowingly misled investors about their prior business venture”, exaggerated the demand for the VERI token, misappropriated investor funds, and didn’t have a product ready at the time of the ICO. Middleton was also accused of avoiding securities laws by trying to “refashion” the purpose of the VERI token several times. The seriousness of these allegations explains why the sanctions against Middleton have been so harsh, and clearly would have been much worse had he tried to fight the case and lost.
Veritaseum’s Fall From the Top
Middleton was known to be in talks with the SEC by early October, with the Order signed on October 31, stating that the Middleton and Veritaseum are jointly liable for disgorgement of $7,891,600, together with prejudgment interest in the amount of $582,535, for a total of $8,474,137. Middleton is liable for a civil penalty in the amount of $1,000,000. The news had little impact on the token, which in 2017 was a high-flyer at $500 with a place in the top ten but has since crashed to 255th place at just over $18 and is now listed only on minor exchanges.