• wblogo
  • wblogo
  • wblogo

SEC presses fraud charges in Bitcoin and office space investment scams

Chris Hamblin, Editor, London, 10 July 2017

articleimage

The US Securities and Exchange Commission has pressed fraud charges against the 'clandestine' founder of a purported Bitcoin platform and a chain of co-working spaces, alleging that he defrauded investors while hiding his chequered regulatory past in the UK.

The SEC alleges that Renwick Haddow, a British citizen living in New York who is reportedly on the run at present, created a broker-dealer firm and did not register it with the SEC. It also accuses Haddow of using sales representatives to 'cold call' potential investors and sell securities in Bitcoin Store Inc and Bar Works Inc, Delaware corporations both, using the United States as a base to raise more than US$37 million from investors fraudulently. The co-working spaces were located in former bars and restaurants. The press releases and offering memoranda for the Bitcoin Store and Bar Works securities offerings never mentioned Haddow, whom the Insolvency Service of the UK had banned from being a company director in 2008 for eight years, having also banned fellow director David Humphrey for a similar period the year before.

According to the SEC’s complaint, investors in both companies were given the details of senior executives who do not appear to the SEC to exist, along with misrepresentations about both companies’ operations. Haddow's idea, the regulator maintains, was to mislead the investors in these two trendy companies into believing that highly-qualified executives were leading them to quick profits. Haddow allegedly diverted more than 80% of the funds raised by the broker-dealer for Bitcoin Store elsewhere and sent more than US$4 million from the Bar Works bank accounts to one or more accounts in Mauritius. He also allegedly sent $1 million to one or more accounts in Morocco.

The SEC alleges that materials provided to Bitcoin Store investors claimed it was “an easy-to-use and secure way of holding and trading Bitcoin” and had generated several million dollars in gross sales. In fact, the SEC alleges that Bitcoin Store has never had any operations at all. In 2015, for example, Bitcoin Store’s bank accounts allegedly received less than $250,000 in incoming transfers, none of which appear to the regulator to have come as revenue from customers. According to the SEC’s complaint, the corporate address used for Bitcoin Store was Haddow’s residential address minus the apartment number.

Bar Works, in the meantime, primarily sold leases coupled with sub-leases that together functioned like investment notes. The company also allegedly sold leases for more workspaces than actually existed in at least two locations. The SEC says that investors sank more than $37 million into the allegedly fraudulent Bitcoin Store and Bar Works offerings, approximately $1.55 million of which Haddow used to purchase real property in San Francisco in another name for a purported Bar Works location. The SEC says that he told the investors, wrongly, that a location was profitable within months of opening and that Bar Works had engaged an auditor.

In a parallel action, the US Attorney’s Office for the Southern District of New York has announced criminal charges against Haddow.

The SEC’s complaint (made in a federal district court in Manhattan) charges Haddow, Bitcoin Store, Bar Works and another Haddow-controlled company called Bar Works 7th Avenue Inc with breaking s17(a) Securities Act 1933, s10(b) Securities Exchange Act 1934 and SEC Rule 10b-5. The complaint further alleges that Haddow is liable for aiding and abetting Bitcoin Store, Bar Works and Bar Works 7th Avenue’s violations. It also says that he is liable as a "control person" for breaking the registration rules in respect of his brokerage firm, InCrowd Equity Inc, a Delaware limited liability corporation. The SEC has obtained an emergency asset freeze against all defendants and relief defendants in the case.

Regulatory/court action in the UK

Haddow allegedly has 'form' when it comes to securities fraud. The UK's Financial Conduct Authority stated on 18 March that it was continuing its High Court claim, begun in 2013, for money to be returned to investors in the African Land (also known as Agri Capital) and Capital Carbon Credits (aka Reforestation Projects) schemes. The FCA claims that the defendants made false and misleading statements to investors. The High Court decided in February 2014 that the schemes were collective investment schemes that the defendants could not operate lawfully. Some of the defendants appealed but in March 2015 the Court of Appeal rejected their appeal and also found that the schemes were collective investment schemes. On 28 July 2015, the UK's Supreme Court refused to give the defendants permission to make a further appeal. The FCA has spent the intervening period preparing legal documents. The trial has now been scheduled for this month, with exact dates to be confirmed.

Apart from Haddow, the remaining defendants in the case (one has settled) are: Capital Alternatives Limited; Capital Secretarial Limited; Capital Organisation Limited; Capital Administration Services Limited; MH Trustees Limited; Marcia Hargous; Richard Henstock; African Land Limited; Robert McKendrick; Alan Meadowcroft; Regency Capital Limited; Reforestation Projects Limited; Mark Ayres/Eyres; and Mark Gibbs.

Latest Comment and Analysis

Latest News

Award Winners

Most Read

More Stories

Latest Poll