The Securities and Exchange Commission charged five Atlantans, including film producer Ryan Felton, rapper and actor Clifford Harris Jr., known as T.I. or Tip, and three others who promoted one of Felton’s fraudulent initial coin offerings.
The SEC also charged FLiK and CoinSpark, the two companies controlled by Felton that conducted the ICOs. Aside from Felton, all of the individuals have agreed to settlements to resolve the charges against them, the SEC said Sept. 11.
The SEC alleges that Felton promised to build a digital streaming platform for FLiK, and a digital-asset trading platform for CoinSpark. Instead, Felton allegedly misappropriated the funds raised in the ICOs. The complaint also alleges Felton secretly transferred FLiK tokens to himself and sold them into the market, reaping an additional $2.2 million in profits, and that he engaged in manipulative trading to inflate the price of SPARK tokens.
Felton, 46, was separately indicted Sept. 9 by a federal grand jury (read it here) on charges arising out of two different cryptocurrency-based investment schemes.
Felton used the vast majority of the investor proceeds to fund his extravagant lifestyle, including an all-cash purchase of a $1.5 million residence and an all-cash purchase of a $180,000 red 2007 Ferrari 599 GTB Fioran Coupe, the feds say.
Atlanta Business Chronicle had reported in March 2019 about a lawsuit by investors who claimed they were defrauded out of millions by Felton, and a related federal investigation into the claims.
According to the feds, "Felton marketed FLiK as an entertainment streaming platform, and he founded CoinSpark as a new cryptocurrency trading exchange. In order to increase, or pump, the price of the coins, Felton made numerous false representations and material omissions before, during and after the ICOs. For example, Felton claimed that all investor funds would go towards the development, launch, and support of the platforms and that private investors made significant investments in the entities. Felton also posed as a potential investor, using fake names, on various internet forums and social media sites in order to further promote false information and build up excitement in CoinSpark. After the ICOs ended, Felton secretly sold thousands of coins on secondary cryptocurrency markets to take advantage of the artificially inflated coin prices based on his misrepresentations and eventually transferred the vast majority of investor funds into his personal financial accounts."
The SEC alleges that "T.I. offered and sold FLiK tokens on his social media accounts, falsely claiming to be a FLiK co-owner and encouraging his followers to invest in the FLiK ICO. T.I. also asked a celebrity friend to promote the FLiK ICO on social media and provided the language for posts, referring to FLiK as T.I.’s 'new venture.'" The SEC’s complaint alleges that T.I.’s social media manager, William Sparks Jr., offered and sold FLiK tokens on T.I.’s social media accounts, and that two other Atlanta residents, Chance White and Owen Smith, promoted SPARK tokens without disclosing they were promised compensation in return. (Read the SEC's action against T.I. here.)
The SEC’s order against T.I. requires him to pay a $75,000 civil penalty and not participate in offerings or sales of digital-asset securities for at least five years.
Also named in the SEC's Sept. 10 complaint are William Q. Sparks Jr., Owen B. Smith and Chance B. White.
The feds say that if Felton is convicted on one or more charges, the government will seek forfeiture of money, a vehicle, and a house at 75 Abington Court in Atlanta.
