Finra makes its first cryptocurrency bust

Finra makes its first cryptocurrency bust
Former broker charged with securities fraud and unlawful distribution of HempCoin.
SEP 11, 2018

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. (More: State regulators investigating more than 200 ICOs and cryptocurrency investments) 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. (More: Apex will soon custody cryptocurrency assets) 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. (More: Cryptocurrency deals receive increased scrutiny by SEC)

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.