The U.S. Securities and Exchange Commission (SEC) wins a $2.8M lawsuit against a crypto firm accused of manipulating the price of a token it issued. The agency alleged that the firm, Lum Network, engaged in an illegal scheme to inflate the price of its Lumcoin token, which was marketed as a stablecoin.
According to the SEC’s complaint, Lum Network sold the Lumcoin token to investors in an initial coin offering (ICO) in 2017. The firm promised investors that the token would be backed by U.S. dollars held in reserve and that the price of the token would remain stable at $1. However, the SEC alleged that Lum Network did not actually have the reserves it claimed and that it engaged in a variety of manipulative tactics to boost the price of the token.
SEC accuses Lum Network of illegal price manipulation scheme
Among the tactics alleged by the SEC were wash trading, a practice in which an entity buys and sells the same asset to create the appearance of trading activity, and spoofing, a practice in which an entity places fake buy or sell orders to influence the market price. The SEC also alleged that Lum Network made false and misleading statements to investors about the stability and value of the Lumcoin token, for which the SEC wins $2.8M in a crypto lawsuit.
In a statement, SEC Enforcement Division Director Stephanie Avakian said, “As alleged, Lum Network engaged in a variety of deceptive practices to artificially inflate the price of its token and create the false impression of market demand. This case shows that the SEC will continue to hold accountable those who seek to manipulate the market for their own gain.”
Lum Network is alleged to engage in deceptive practices to inflate the token price
Under the terms of the settlement, Lum Network agreed to pay $2.8 million in disgorgement and penalties. The firm also agreed to cease and desist from further violations of the securities laws and to register its Lumcoin token as a security with the SEC.
In a statement, Lum Network said it was pleased to have reached a settlement with the SEC and that it had taken steps to address the issues raised by the agency. “We are committed to complying with all applicable laws and regulations, and to ensuring that our investors are fully informed about the risks and rewards of investing in our products,” the statement said.
SEC’s enforcement action against Lum Network sends a message to the cryptocurrency market
The case is one of several that the SEC has brought in recent years against firms accused of fraudulent conduct in the cryptocurrency market. In December 2020, the agency filed a lawsuit against Ripple Labs, alleging that the firm had conducted an unregistered security offering with its XRP token. Ripple has denied the allegations, and the case is currently ongoing.
The SEC has also issued warnings to investors about the risks of investing in cryptocurrencies and ICOs. In a statement in 2017, the agency said that “fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest their money in scams.” The agency urged investors to exercise caution and conduct thorough research before investing in any cryptocurrency or ICO.
The settlement with Lum Network, where SEC wins $2.8M in a crypto lawsuit, is a reminder that the SEC will continue to pursue enforcement actions against firms that engage in fraudulent conduct in the cryptocurrency market. The agency has made it clear that it will use all the tools at its disposal to protect investors and maintain the integrity of the securities markets.
Also Read: Anti-Russia Sanctions Will Trigger Global Economic Crisis Warns Russian official.
