The Financial Industry Regulatory Authority Inc. has charged former broker Timothy Ayre with securities fraud and the unlawful distribution of HempCoin, an unregistered cryptocurrency security.
The case marks Finra's first disciplinary action involving cryptocurrencies.
The complaint filed Tuesday alleges Mr. Ayre, from January 2013 through October 2016, issued and sold HempCoin to lure public investment into Rocky Mountain Ayre, which Finra described as "his worthless public company." The company was quoted on the Pink Market of OTC Markets Group and traded over the counter under the ticker RMTN.
According to a company description on Bloomberg, Rocky Mountain Ayre "engages in food and hospitality, manufacturing, medical marijuana, and retail businesses," including one restaurant in Agawam, Mass.
In June 2015, Mr. Ayre bought the rights to HempCoin and repackaged it as a security backed by RMTN common stock. He then publicized HempCoin as "the first minable coin backed by marketable securities," and "the world's first currency to represent equity ownership" in a publicly traded company, promising investors 0.10 shares of RMTN stock for each coin.
Investors mined more than 81 million HempCoin securities through late 2017 and sold it on two cryptocurrency exchanges, according to Finra.
Finra says Mr. Ayre never registered HempCoin and no exemption applied. Additionally, he made claims about Rocky Mountain Ayre's business and finances that Finra claims were fraudulent.
Mr. Ayre is not currently registered as a broker. He most recently registered through Four Points Capital Partners in June 2016, but voluntarily resigned just four months later.
Prior to that, Mr. Ayre was with Spencer Edwards for three years before being terminated for "failure to disclose outside business activities, failure to disclose private securities transactions, [and] possible misrepresentation of facts related to statement concerning securitization of assets by a public company," according to BrokerCheck.
The alleged HempCoin scheme weds two of the trendiest areas of investment — marijuana and cryptocurrency. Finra has issued an investor alert warning about cryptocurrency-related stock scams, while the Securities and Exchange Commission recently updated its own alert on fraudulent marijuana investments.