A potentially fraudulent cryptocurrency company claims it is tied to one of Wall Street's largest proprietary trading firms.
But that firm, Virtu Financial Inc., says otherwise.
VirtCoin Financial claims on its website that it is working with Virtu to launch a digital currency called VIRT in 2018, as well as a blockchain network. When reached for comment, a Virtu official said the company has no ties to VirtCoin.
"VirtCoin has no relationship, connection or affiliation to Virtu Financial and its officers and directors," Virtu spokesperson Andrew Smith said in a statement.
VirtCoin's website features few details about the company or its operations. Its site's splash page opens with a video of a Lamborghini Aventador speeding through the desert. The words "Focus on Finance for 10 years" are superimposed over the video.
Throughout the site, VirtCoin ties itself to Virtu by placing the trading company's logo at various points. The website also linked to a "2018 White Book" — a malapropism of the white papers typically released for initial coin offerings, or ICOs — that lists a number of Virtu executives, including CEO Douglas Cifu, Chairman Robert Greifeld, and Founder and Chairman Emeritus Vincent Viola, as members of VirtCoin's "support team."
Virtu has "notified the appropriate authorities and intends to commence all necessary legal actions to defend itself from any attempt to infringe its trademarks and intellectual property," Smith said in the statement.
S&P Global Market Intelligence attempted to contact VirtCoin using an email address listed on a number of press releases detailing the company's efforts but received no response.
The episode underlines a new reality in the age of cryptocurrencies. New companies are looking to generate income through ICOs in which they create digital tokens to sell to potential investors.
The rise of ICOs has come at a cost for some, though. The Securities and Exchange Commission has increasingly targeted fraudulent offerings during Chairman Jay Clayton's first year at the regulator's helm.
In January, the SEC shut down an ICO being offered by Dallas-based AriseBank, which claimed to have recently acquired a Federal Deposit Insurance Corp.-insured bank with the hope of creating the first "decentralized bank." A report emerged Feb. 28 that the SEC issued a series of subpoenas and information requests to technology companies and advisers involved with ICOs.
"A number of concerns have been raised regarding the cryptocurrency and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation," Clayton said in December 2017.
An SEC spokesperson did not respond to multiple requests for comment on VirtCoin and the claims made on its website.
The idea of impersonating established institutions for one's own gain, whether it be monetary or otherwise, is far from novel.
The VirtCoin situation rekindles memories of John Reed Stark's time at the SEC, where over the course of more than 20 years, he worked on several similar impersonation cases, including as founder and head of the regulator's Office of Internet Enforcement.
At the SEC, and as the current president of John Reed Stark Consulting LLC, Stark has investigated a number of situations where individuals generate fake press releases and websites to try and personally gain by guiding a company's narrative in a particular direction. In an interview, Stark said website providers hosting fraudulent sites tend to be more willing to take the site down when it improperly uses a company's logo or falsely claims to be affiliated with it.
"A flat-out falsehood makes the fraud much easier to prove, whatever the scheme is," he said.
