The U.S. Securities and Exchange Commission has announced charges against California resident James Roland Jones in the first-ever enforcement action from the commission to target securities fraud on the darknet. The dark web was designed to let users access the internet anonymously and it is intentionally hidden requiring special software to access the content. It is often used to promote illegal activities and protect the user from identification.
According to the SEC complaint, Jones is accused of entering a darknet-based insider trading forum to try to get material non-public information, or MNPI, on which to trade securities. Althhough he was unable to get any useful MNPI from the forum, Jones began selling insider stock tips himself under the false pretext he was privy to MNPI obtained both from the forum and corporate sources he claimed to be personally affiliated with. Jones is believed to have received roughly $27,000 worth of BTC for the fraudulent tips according to the complaint. Jones’ tips were believed to be general predictions as to whether a stock would go up or down, with Jones sometimes selling tips for the same stock to go in both directions to different customers. When tips failed, Jones would offer another tip for free in exchange for positive reviews on a darknet marketplace. He also began operating a collective investment pool in 2017, claiming to make trades on behalf of investors. However, he was not trading with investors’ funds, and would instead return a small amount of the principal invested as purported profits to lure his victims into depositing additional funds. The SEC accuses Jones of having acted in violation of anti-fraud provisions of the Exchange Act, and is seeking disgorgement of ill-gotten gains plus interest, civil penalties, and permanent injunctive relief.
Jeffrey Newman represents Whistleblowers including SEC whistleblowers nationwide and also individuals abroad. He can be reached at jeff@jeffnewmanlaw.com or at 617-823-3217
