The SEC subpoenas the former owner's bank accounts to find out what happened to investments into Crypto Traders Management.
Dissolved limited liability company Crypto Traders Management is seeing its legal troubles multiply.
Per a Friday legal filing in Utah, CTM and its former manager Shawn Cutting are trying to fight off a subpoena from the Securities and Exchange Commission. The SEC is apparently demanding financial data from Cutting — specifically, all of the transaction information from his Wells Fargo accounts as well as his communications with the bank.
Cutting is trying to quash the SEC's request by pleading a right to financial privacy.
Back in July, former investors in CTM filed a civil suit accusing the firm of selling shares in a sham crypto fund and subsequently refusing to cash those investments out. The investors sought over a million dollars in funds to return as well as penalties.
For his part, Cutting is pleading innocence and ignorance, blaming a combination of attorneys and hackers on failures to file and return investor funds. In a Nov. 25 affidavit in the civil case, he said:
"CTM did all due diligence with research to be able to launch the company, and completed everything it takes to start a crypto currency business — again through attorneys. Based on the representations of our attorneys, I believed they took every measure to get CTM 'legally' set up, registering CTM as with the SEC, setting CTM up with the IRS, etc. This was all done in January of 2018."
Cutting similarly denied knowing that it is illegal to offer certain investment opportunities to certain people:
"With respect to Plaintiffs’ allegation that CTM didn’t take any steps to confirm Powell’s identify or his status as an accredited or sophisticated investor. My attorneys never informed me that I was required to do so, and again, I relied on their advice."
Cutting's affidavit, however, is vague on the ultimate fate of client money, alluding to: "The first sign of issue/difficulties/loss of money for an exchange/hackers/etc. for CTM started mid-2019." It may be in pursuit of hard evidence that the SEC issued its subpoena.
Cointelegraph reached out to CTM's legal team but had received no response as of publication time.
As a new area of investment, the crypto world has seen more than its fair share of Ponzi schemes aiming to profit off of wild markets and uninformed investors. One of the most famous is PlusToken, which just had over $4 billion in crypto seized by the Chinese government.