SEC Sues Donald Basile Over Alleged $16M Bitcoin Latinum Crypto Fraud

Highlights:

• U.S. regulators accused Donald Basile of misleading investors in the Bitcoin Latinum token offering.
• The agency says Basile made false claims about insurance, asset backing, and fund use to investors.
• SEC seeks penalties as Bitcoin Latinum became worthless and investors reportedly lost everything.

The U.S. Securities and Exchange Commission (SEC) has filed fraud charges against Donald G. Basile, the founder of the crypto project Bitcoin Latinum, and two companies he controlled. The agency alleges Basile raised $16 million from hundreds of U.S. investors by making false promises about a digital token that never delivered on its core claims. The agency filed the complaint on Friday in the U.S. District Court for the Eastern District of New York.

SEC Says Basile Misled Investors in Bitcoin Latinum Offering

The regulator claimed that Basile and his companies, GIBF GP, Inc., and Monsoon Blockchain Corporation, sold “Simple Agreements for Future Tokens,” or SAFTs. These deals promised investors that they would receive a future crypto token called Bitcoin Latinum, or LTNM.

To attract investors, Basile allegedly made several strong claims that the SEC says were false. For example, he reportedly called LTNM “the world’s first insured digital asset” and said it had up to $1 billion in insurance coverage. However, the SEC says no insurance company ever issued a policy for LTNM or for the offering.

He also allegedly told investors that the token was backed by assets and protected by an existing trust. But the complaint says no such trust or asset pool was ever created. If these claims prove false, they would show that investors received misleading information before putting in their money.

Basile Spent Investor Funds on Personal Purchases

The SEC’s filing says Basile used the proceeds from the SAFT sales improperly. He told investors that at least 80% of the funds would support LTNM’s value or go into an underlying fund. Instead, the SEC says he spent millions of dollars on personal expenses.

The SEC specifically said he spent about $4.1 million on a Miami condominium, $2.8 million on a house in Park City, around $1.4 million on payments for his personal American Express card, and $160,000 on a horse for his daughter.

The SEC argues that he used the funds without investor approval. It says he misled investors, broke his duty to them, and violated federal securities laws.

Charges and Potential Consequences

The SEC charged Basile with breaking federal anti-fraud laws under the Securities Act of 1933 and the Securities Exchange Act of 1934. It also charged GIBF and Monsoon with anti-fraud violations. In addition, the SEC says Basile helped the two companies carry out the alleged misconduct.

The regulator wants the court to take several actions. It sought permanent orders to stop future violations, repayment of the alleged illegal gains with interest, civil penalties, and a ban prohibiting Basile from serving as an officer or director of a public company. The SEC also wants the court to bar the defendants from participating in securities offerings, except for certain transactions in their personal accounts.

The SEC also said Bitcoin Latinum is now worthless and that many investors allegedly lost all of their money. However, the case is still at the complaint stage, so the SEC’s claims have not yet been proven in court.