SEC Sues Touzi Capital Over Misleading Crypto Mining Fund Claims

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against investment firm Touzi Capital, accusing it of defrauding investors and misrepresenting the liquidity and profitability of its crypto asset mining fund.

According to the SEC’s statement released on November 29, Touzi Capital allegedly raised nearly $95 million from more than 1,200 investors through its crypto mining fund.

The firm reportedly claimed that the funds would be used exclusively for cryptocurrency mining operations.

SEC Claims Touzi Capital Diverted Funds to Unrelated Ventures

However, the SEC contends that Touzi Capital diverted investor funds to unrelated ventures through its subsidiaries.

The complaint also alleges that Touzi Capital misled investors about the risks and potential returns of the investment.

The firm purportedly likened its offerings to stable, high-yield money market accounts, despite the SEC’s assertion that the fund was “risky and illiquid.”

Additionally, the SEC claims that Touzi Capital continued soliciting new investments even after its ventures began failing.

This case is the latest in a series of legal actions targeting fraudulent practices within the crypto industry.

Recently, a U.S. federal judge rejected an appeal by Kristoffer Krohn, accused of promoting an $18 million fraudulent crypto mining scheme.

Krohn’s argument that the SEC had not adequately demonstrated the Green Boxes were securities was dismissed.

As legal battles between crypto firms and the SEC persist, some industry leaders suggest a potential shift in regulatory attitudes with political changes.

Speaking at DevCon 2024, Consensys CEO Joe Lubin speculated that Donald Trump’s potential return to the presidency could alleviate the financial strain on the crypto sector, potentially reducing ongoing litigation costs.

SEC Is Under Scrutiny

As of late, the SEC has been facing growing criticism due to its “regulation-by-enforcement” approach to the crypto industry.

Critics argue that the SEC has failed to establish a clear regulatory framework for cryptocurrencies, opting instead to pursue legal action against key industry players.

As reported, a coalition of seven U.S. states has come together to challenge the Securities and Exchange Commission’s (SEC) regulation of cryptocurrency.

Led by Iowa Attorney General Brenna Bird, the states have filed an amicus brief arguing that the SEC’s attempt to regulate cryptocurrencies constitutes a “power grab” that would stifle innovation, harm the crypto industry, and exceed the agency’s authority.

The coalition includes Arkansas, Indiana, Kansas, Montana, Nebraska, with Oklahoma becoming the latest state to join.

Earlier this year, SEC Commissioner Hester Peirce said that the regulatory agency is currently operating in an “enforcement-only mode” when it comes to the regulation of cryptocurrencies.

As reported, President-elect Donald Trump is considering selecting Paul Atkins as SEC Chair.

Atkins – who previously served under SEC chairs Richard Breeden and Arthur Levitt – is both “crypto savvy” and has a “deep understanding of the inner workings of the agency.”

Trump, who most recently launched his family’s crypto platform World Liberty Financial, has regularly vowed to enact a crypto-friendly regulatory framework upon returning to the Oval Office.