A U.S. Judge has shown some sympathies to Robert B. Ladd, the CEO of Bitcoin mining firm MGT Capital Investments, over an alleged $27mn pump-and-dump scheme. District Judge Edgardo Ramos said that the SEC had failed to provide sufficient evidence that Ladd had violated securities laws. However, the Commission had successfully demonstrated his role in “aiding and abetting” the scheme.
The Case Against Bitcoin Miner CEO
Judge Ramos tossed out the SEC’s claims that Ladd had violated securities laws by failing to mention the existence of a small group of investors who collectively owned more than 5% of his bitcoin mining business.
Despite being the group who orchestrated a $27mn pump-and-dump scheme involving MGT and two other companies, the Judge stated that Ladd had no duty to disclose details of their stock ownership under existing regulations.
He did, however, conclude that the SEC had adequately implicated Ladd in the scheme by revealing a long history between him and the investor group. This included paying writers to promote MGT with false reporting. The Judge ruled:
With this history behind him, Ladd’s knowledge of the [investor] group’s continuing violations of the securities laws becomes even more plausible.
A second area in which the judge found sufficient evidence surrounded claims that the MGT CEO had misled investors over the appointment of John McAfee.
In May 2016, Ladd announced that MGT was considering taking McAfee on as CEO after agreeing to purchase one of his companies.
A $27M Pump-and-Dump
Ladd was initially accused by the SEC in Sept. 2018 of taking part in a pump-and-dump scheme led by one of the largest shareholders in Riot Blockchain, Barry Honig.
Honig, along with former Riot Blockchain CEO John O’Rourke,