SEC Halts Alleged Diamond-Related ICO Ponzi Scheme

Regulator charges cryptocurrency firms with securities fraud.

The SEC has obtained a court order to stop an alleged $30 million Ponzi scheme targeting more than 300 investors in the US and Canada. The complaint charges cryptocurrency business Argyle Coin and its principal, Jose Angel Aman, with using investor funds to run a Ponzi scheme.

“As alleged, Aman operated a complicated web of fraudulent companies in an effort to continually loot retail investors and perpetuate the Ponzi schemes as well as divert money to himself,” Eric Bustillo, director of the SEC’s Miami regional office, said in a release.

On May 20, the US District Court for the Southern District of Florida granted the SEC’s request for a temporary restraining order and temporary asset freeze against Aman, Argyle Coin, and other companies charged by the SEC as relief defendants. The SEC also named Harold Seigel and Jonathan Seigel in the complaint as co-owners with Aman.

The alleged fraud, said the SEC, is a continuation of a scheme Aman orchestrated with two other companies he owns called Natural Diamonds Investment Co. and Eagle Financial Diamond Group. 

According to the complaint, Aman and Jonathan Seigel attracted investors to invest in Argyle Coin by falsely claiming the investment was risk-free because it was backed by so-called “fancy colored diamonds.” They also promised to use investor funds to develop the cryptocurrency business. Instead, the SEC claims, they used new investor funds to pay prior investors their purported returns, and for Aman’s personal expenses, including rent on his home, purchases of horses, and riding lessons for his son.

“To lure investors, the defendants have knowingly or recklessly materially misrepresented how they would use investor funds,” said the SEC in its complaint. “Collectively, the defendants have misused or misappropriated more than $10 million of the $30 million raised from investors in a manner contrary to the representations to investors.”

The complaint alleges that between May 2014 and December 2018, Natural Diamonds, Aman, and the Siegels offered unregistered securities in the form of investment contracts in Natural Diamonds. They told prospective investors that Natural Diamonds would use investor funds to acquire raw colored diamonds known as “fancy colored diamonds,” which they would then cut, polish, and resell for profits that would bring in investment returns of 24% and the full return of investors’ principal within two years.

The SEC also said that when “the well began to run dry” in early 2015, Eagle, Aman, and the Seigels launched a second unregistered offering, this time in the form of investment contracts in Eagle. It alleges they made the same false representations about the use of investors’ funds, and fueled the Ponzi scheme by using Eagle investors’ funds to pay Natural Diamonds and Eagle investors their purported investment returns.

The SEC’s complaint charges Natural Diamonds, Eagle, Argyle Coin, Aman, and the Seigels with violating the securities registration provisions and also charges Natural Diamonds, Eagle, Argyle Coin, and Aman with violations of the antifraud provisions of the federal securities laws. The SEC’s complaint seeks disgorgement of the allegedly ill-gotten gains and prejudgment interest.

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