SEC Fines and Permanently Bars Founder of Fraudulent Oil Exploration Token

The U.S. Securities and Exchange Commission (SEC) has taken action against an oil and gas exploration company and its founder who “perpetrated a fraudulent initial coin offering (ICO) to fund oil exploration and drilling in California.” The token sale failed to raise money but the tokens were issued as part of a bounty program, which the SEC considers securities.

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The SEC announced Tuesday that it has taken action against David Thompson Laurance and the oil and gas exploration company he founded, Tomahawk Exploration LLC. Laurance attempted to raise money by issuing digital tokens, tomahawkcoins (TOM).

Founded by Laurance in 2010, Tomahawk “engaged in an offering of Tomahawk securities that constituted penny stock,” the SEC described. The 76-year-old California resident is the sole managing member of Tomahawk.

“The SEC’s order finds that Tomahawk and Laurance violated the registration and antifraud provisions of the federal securities laws,” the Commission detailed, adding:

The SEC has obtained a permanent officer and director bar against Laurance which prevents him from serving as an officer or a director of any SEC-reporting company.

The penny stock bar prohibits him from owning a penny stock in his own account as well as engaged in any activities related to an offering of a penny stock including acting as a promoter, finder, consultant, agent, broker, dealer, or issuer.

According to the SEC, Laurance “perpetrated a fraudulent initial coin offering (ICO) to fund oil exploration and drilling in California.”

He used “inflated projections of oil production that were contradicted by the company’s own internal analysis” in his promotional materials. In addition, he “misleadingly suggested that Tomahawk possessed leases for drilling sites when it did not,” the Commission clarified.

Tomahawk’s promo materials described Laurance as having a “flawless background,” omitting information about his prior criminal conviction for his role in fraudulent securities offerings. “Tomahawk also claimed that token owners would be able to convert the tomahawkcoins into equity and potentially profit from the anticipated oil production and secondary trading of the tokens,” the SEC detailed.

Robert A. Cohen, Chief of the SEC’s Cyber Unit, warned:

Tomahawk originally wanted to raise $5 million through the ICO after failing to raise funds through private investments and public capital markets.

The company, however, “failed to raise money through the ICO…[but] issued approximately 80,000 TOM as part of a ‘bounty program’ in exchange for online promotional and marketing services,” the SEC noted. Based on the facts and circumstances of the case, “TOM tokens are securities because they are investment contracts…and because they represent a transferable share or option on a security,” the Commission elaborated:

The SEC concluded that Tomahawk and Laurance violated the Securities Act by “offering and selling TOM without having a registration statement filed or in effect with the Commission or qualifying for an exemption from registration with the Commission.”

What do you think of the SEC’s action against Tomahawk and its founder? Let us know in the comments section below.

Images courtesy of Shutterstock and the SEC.

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source: https://news.bitcoin.com/sec-fines-bars-founder-oil-exploration-token/