Sometime this week, the US Financial Industry Regulatory Authority has taken its first disciplinary step involving cryptocurrencies. The FINRA charges a dealer with the fraudulent and unlawful distribution of unregistered crypto securities. The owner purportedly “attempted to lure public investment in his worthless public company” by issuing “the first minable coin backed by marketable securities.”
This past Tuesday, the US Financial Industry Regulatory Authority (FINRA) issued its first disciplinary action that is related to crypto. It announced, “that it filed a complaint against Timothy Tilton Ayre of Agawam, Massachusetts, charging him with securities fraud and the unlawful distribution of an unregistered cryptocurrency security called Hempcoin.” It also added, “This case represents FINRA’s first disciplinary action involving cryptocurrencies.”
The FINRA is the largest independent regulator for all securities firms doing business in the US. The FINRA’s mission is to protect investors by making sure the United States securities industry operates fairly and honestly. Even though the organization is not part of the government, it is overseen by the US Securities and Exchange Commission (SEC). The FINRA notes on its website that FINRA “has the authority to fine, suspend or bar brokers and firms form the industry.”
According to the announcement made on Tuesday, “The issuance of a disciplinary complaint represents the initiation of a formal proceeding by FINRA in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint.” However, all parties mentioned in the complaint can also file a response and request a hearing before a FINRA disciplinary panel, the FINRA’s notice explains.
Ayre is listed as the president of Rocky Mountain Ayre Inc., which is a publicly traded company listed on the OTC Grey market in the RMTN trading symbol. As stated in the complaint, FINRA alleges that, from January 2013 through October 2016, Ayre made “fraudulent, positive statement about RMTN’s business finances.” According to the FINRA, Ayre bought the rights to Hempcoin back in June 2015. He then repackaged the token as a security backed by RMTN common stock and marketed it as “the world’s first currency to represent equity ownership” in a publicly traded company. Investors promised that “each coin was equivalent to 0.10 shares of RMTN common stock,” proceeded to mine more than 81 million Hempcoin securities through late 2017. The FINRA noted that the coins were traded on twos crypto exchanges.
The FINRA concluded by stating “FINRA charges Ayre with the unlawful distribution of an unregistered security because he never registered Hempcoin and no exemption to registration applied.”