Riot Blockchain’s CEO Charged with Fraudulent Schemes
John O'Rourke steps down from his position as chairman and Chief Executive Officer of American-based former biotechnology firm, Riot Blockchain, in response to receiving charges of fraudulent activity issued by the US regulatory authority SEC. His Predecessors are to be Chris Ensey as an interim CEO and Remo Mancino as the newest chairman to the board.
SEC Cracks Down on Crypto-based Fraudulent Activities
Ten people and their retrospective firms have received charges of fraudulent activity from the SEC during this Friday’s announcement totalling to $27 million. According to a press release given by the organization, the accused were labeled as microcap fraudsters who illegally participated in the selling of inflated shares resulting in retail investors owning stocks considered to be worthless.
O'Rourke and Barry Hoing were among those charged with fraud. Hoing was previously one of O’Rourke’s largest shareholders however was not involved in fraudulent activities pertaining to Riot Blockchain itself. He was however charged with being the main strategist linked to three accounts of securities fraud that involved artificially inflating prices of stocks.
The Alleged Pump-and-Dump Scheme
The SEC believe he initially acquired large shares from all aforementioned companies at massive discounted prices. Once gaining ownership interests, O’Rouke participated in illegal and manipulative market tactics to raise prices and trading volumes for those stocks. This industry tactic has come to be known as the pump and drop strategy, in which prices are pumped with artificial hype and misrepresentation in order to then sell to investors at an inflated price. The SEC currently suspects the accused group had dumped these stocks resulting in millions of US dollars worth of investor losses.
After receiving accusations of fraudulent activity, O'Rouke resigned and Riot Blockchain, despite being unmentioned throughout the SEC’s complaint witnessed a dip of 24% in overall stock values during Friday’s market trading. Riot Blockchain responded to the incident by announcing a restructuring of their C-level members.