Renwick Haddow, a UK citizen living in New York, created a broker-dealer company called InCrowd Equity Inc and used sales reps to cold call potential investors and sell securities in two other companies he set up, Bitcoin Store Inc and Bar Works Inc.
Haddow, who had been disqualified from serving as a company director for eight years in the UK in 2008 and was sued by the UK regulator for misleading investors in an unrelated investment scheme, did not register InCrowd Equity with the SEC as required by law.
During the SEC’s investigation, Haddow invoked his fifth amendment right against self-incrimination.
In a parallel action, the US Attorney’s Office for the Southern District of New York announced criminal charges against Haddow.
Misrepresentations
According to the SEC’s complaint, materials presented to investors in Bitcoin Store and Bar Works touted the backgrounds of senior executives who do not appear to exist and misrepresented other key facts about both companies’ operations.
Haddow allegedly diverted more than 80% of the funds raised by the broker-dealer for the Bitcoin Store, and sent more than $4m from the Bar Works bank accounts to one or more accounts in Mauritius and $1m to one or more accounts in Morocco.
He is believed to have funnelled at least $18 to accounts in around 40 countries.
Andrew Calamari, director of the SEC’s New York regional office, said: “As alleged in our complaint, Haddow created two trendy companies and misled investors into believing that highly-qualified executives were leading them to quick profitability.
“In reality, Haddow controlled the companies from behind the scenes and they were far from profitable.”
Bitcoin platform
Bitcoin Store was sold to investors as “an easy-to-use and secure way of holding and trading Bitcoin” that had generated several million dollars in gross sales. Investors were promised returns of around 8% per annum.
However, the SEC alleges that Bitcoin Store never had any operations nor generated the gross sales it touted. In 2015, for example, Bitcoin Store’s bank accounts allegedly received less than $250,000 in incoming transfers, none of which appear to reflect revenue from customers.
Additionally, according to the SEC, the corporate address used for Bitcoin Store was Haddow’s residential address minus the apartment number.
Premium office space
Bar Works claimed to bring “real vibrancy to the flexible working scene by adding full-service workspaces to former bar and restaurant premises in central city locations”.
It offered short-term, shared office space in renovated bars in New York City and San Francisco. Bar Works did open at least two locations with workspaces in Manhattan.
The company primarily sold leases coupled with sub-leases that together functioned like investment notes. Investors were promised returns of at least 15% each year.
The company also allegedly sold leases for more workspaces than actually existed in at least two locations. Among false claims made to investors were that a location was profitable within months of opening and that Bar Works had engaged an auditor.
