Bermuda connection to fintech fraud firm
A fintech company whose authorisation to offer digital coins from Bermuda was hailed as “the start of a new era for Bermuda” has settled allegations of securities fraud.
Uulala Inc and two senior executives were charged in a California US District Court with conducting a fraudulent and unregistered digital asset security offering.
The US Securities and Exchange Commission announced the charges and a settlement yesterday, reporting that the parties had agreed to final judgements that would disable the disputed tokens, and, garner fines collectively from the parties of more than half a million dollars.
The agreement was made without the defendants admitting or denying the allegations.
The settled charges were brought against Uulala, Inc., and two of its founders, Oscar Garcia and Matthew Loughran for allegedly defrauding more than 1,000 investors in an unregistered offering of digital asset securities that raised more than $9 million.
There were also charges against Uulala and Garcia for allegedly engaging in a second fraudulent offering of convertible notes.
The Royal Gazette reported in 2018 that the Uulala Bermuda approval was hailed by then-Minister of National Security Wayne Caines as “the start of a new era for Bermuda”.
The article quoted Mr Garcia: “We are looking at operating from Bermuda.”
He spoke of how the Bacardi International story resonated with him: “A group of Cuban Latinos who went to Bermuda and established their headquarters there. We are looking at doing something similar.”
The company had already raised $10 million privately and sought to raise up to $50 million in its sale of tokens.
Uulala, he said, had been attracted by Bermuda's strong reputation as a financial centre and the licensing “involved stringent due diligence of the company and its principals”.
But business website Offshore Alert, which is also reporting on yesterday’s judgment, reported in 2019 that Mr Garcia had a history of court judgments and tax liens against him in the US in connection with other businesses.
An SEC statement said the complaint, filed in the US District Court for the Central District of California, alleges that, from December 2017 through January 2019, Uulala sold UULA tokens, which were allegedly to be used to record transactions in a financial application that Uulala was developing and promoting to those without access to traditional banking services.
According to the SEC's complaint: “Uulala, Garcia, and Loughran made materially false and misleading statements to investors throughout their offering of UULA about having "patent pending" technology that had been incorporated into their app and having a proprietary algorithm to assign credit scores to users of their app.”
The complaint further alleges that: “Uulala and Garcia then made materially false and misleading statements about Uulala's financial performance in the convertible notes offering. The SEC also alleges that Uulala did not register its offers and sales of UULA tokens with the Commission.”
Uulala and Garcia were charged with violating the registration and antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.
Loughran was charged with violating Section 5 and Section 17(a)(3) of the Securities Act.
The SEC statement continued: “Without admitting or denying the allegations, Uulala, Garcia, and Loughran each consented to final judgments ordering injunctive relief and undertakings aimed at permanently disabling the UULA and EUULA tokens and removing them from digital asset trading platforms, and the payment of civil penalties in the amount of $300,000 as to Uulala, $192,768 as to Garcia, and $50,000 as to Loughran.”