SEC Halts Fraudulent Cryptocurrency Offering—Operators Were Soliciting Funds from Investors in Florida
On June 19th, 2020, the Securities and Exchange Commission (SEC) announced emergency action against Sean Hvizdzak and Shane Hvizdzak—two brothers from Central Pennsylvania. Federal regulators contend that the men raised money for private cryptocurrency-related funds by making false representations. The SEC also believes that investor money was misappropriated.
Notably, the Hvizdzak brothers solicited money from investors across several states, including Florida. The agency obtained a restraining order and an emergency asset freeze, and it is seeking additional sanctions. Here, our Miami investment fraud lawyers provide an outline of the allegations raised against the Hvizdzak brothers.
SEC Complaint: Material Misrepresentation, Misappropriation of Funds
In a complaint filed in the United States District Court for the Western District of Pennsylvania, the SEC filed a complaint alleging that Sean Hvizdzak and Shane Hvizdzak used at least four companies—Hvizdzak Capital Management LLC, High Street Capital LLC, High Street Capital Partners, LLC, and High Street Capital Fund USA, LP—to raise funds from investors.
As private placement investments, the brothers were selling unregistered securities to investors. Collectively, the funds were marketed to investors as holding a wide variety of cryptocurrency-related assets. According to the disclosures made in marketing material to investors, Mr. Hvizdzak and Mr. Hvizdzak touted the private placements as:
- Using advanced algorithmic strategies to take advantage of volatile conditions in the cryptocurrency markets; and
- Positioned to offer investors access to a low risk, above market rate of return.
For reference, the brothers told actual and prospective investors that their funds made a 100.77 percent return in the third quarter of 2019 and a 92.90 percent return in the fourth quarter of 2019. The SEC alleges that these numbers were totally fraudulent. Not only did the funds collectively lose money during these periods (a material misrepresentation), but the brothers are believed to have improperly diverted tens of millions of dollars for their own personal use (misappropriation). Indeed, the SEC contends that the brothers fabricated financial statements and forged key documents.
Emergency Action: Restraining Order and Asset Freeze
Federal securities regulators have taken emergency action to halt the fraudulent private securities offerings. On June 16th, the SEC obtained a temporary asset freeze—prohibiting the defendants from moving additional assets around. In addition, the agency obtained an emergency restraining order that bars the defendants from altering or destroying any relevant documents and records. In continuing to pursue the matter, the Securities and Exchange Commission is seeking disgorgement of ill-gotten gains, financial restitution for all affected investors, payment of civil penalties, and any other form of equitable relief deemed appropriate given the circumstances.
Call Our Miami, FL Unregistered Securities Fraud Attorneys for Immediate Assistance
At Carlson & Associates, P.A., our Florida unregistered securities lawyers are experienced, client-focused advocates for investors. If you suffered losses in a fraudulent cryptocurrency offering, we are available to help. For more information on what we can do for you, please call our law office today. We represent investors in Miami, South Florida and beyond.
Resources:
sec.gov/litigation/complaints/2020/comp-pr2020-137.pdf
sec.gov/news/press-release/2020-137