The SEC has filed swimsuit in opposition to Steven Chiang (aka Cyrus Kong), Eric Tippetts, James Hardy and Maurice “Butch” Chelliah.
As alleged by the regulator, the defendants scammed customers out of tens of millions by means of their Nasgo and ShareNode Ponzi schemes.
Stephen Chiang started Nasgo and NSG token improvement in 2015.
He and Tippetts, who Chiang met in 2012, launched Nasgo in December 2017.
Nasgo was your typical crypto shitcoin money seize that went nowhere.
Chiang and Tippetts claimed that early traders would obtain automated, constant funds in NSG tokens that will improve in worth as demand for NSG tokens elevated, that tens of hundreds of shoppers can be signing up day by day, and that the variety of new shoppers would develop to tens of millions per day in two years.
Chiang and Tippetts marketed Nasgo because the “world’s first trillion greenback blockchain”.
Nasgo’s flop culminated in 1 BTC or 25 ETH “Founding Delegate” positions. On the time this got here to $16,625 and $20,475 respectively.
In change for buying a Founding Delegate curiosity, Chiang and Tippetts promised that Founding Delegates would obtain 25,000 NSG tokens upfront and that they’d obtain an annual professional rata share of 8.5 million NSG tokens.
Principally suckers who purchased into NSG early, hoping to rip-off those that invested after them.
Nasgo flopping culminated in Tippetts mendacity about bought out Founding Delegate positions.
On Could 4, 2018, Tippetts printed a YouTube video wherein he claimed the Founding Delegate pursuits have been bought out.
There have been 1000 Founding Delegate positions accessible.
Tippetts knew, or was a minimum of reckless in not realizing, this declare—that the Founding Delegate pursuits have been bought out—was false.
He knew that, in actuality, NASGO solely bought roughly 40 Founding Delegate pursuits in the US—4% of what he publicly claimed—which raised not more than $837,000.
Tippetts knew this, amongst different issues, as a result of he was answerable for sending invites for a July 2018 Founding Delegate name that he hosted.
Tippetts despatched solely 42 e mail invitations for that decision – a far cry from 1,000 Founding Delegates he had promised.
Regardless of that data, on the July 2018 name, Tippetts once more falsely claimed that each one 1,000 Founding Delegate pursuits had “bought out in a short time.”
Round this time ShareNode was launched. It was by means of ShareNode that BehindMLM grew to become conscious of Nasgo.
ShareNode noticed Chiang and Tippetts deliver James Hardy (proper), and affiliate Maurice Chelliah on board.
Sharenode presupposed to be “the advertising arm of NASGO” and “powered by NASGO.”
Tippetts, together with Hardy, who possessed important multi-level-marketing (“MLM”) expertise, labored collectively to market and promote Sharenode’s unregistered digital asset safety—the SNP token.
ShareNode was your typical Ponzi scheme. Associates invested in SNP tokens on the promise of passive returns, paid in SNP and NSG tokens.
All in all ShareNode took in over $10 million from affiliate traders.
One of many issues MLM crypto Ponzis face is dump strain on their token resulting from promoting off.
ShareNode’s enterprise mannequin countered this by means of deliberate Ponzi fashion manipulation. Or a minimum of that was the preliminary plan.
From the outset, the worth of the SNP token was fabricated by Tippetts and Hardy, and the represented improve in worth by no means materialized for traders.
In reality, inside the first few months of the June 2018 launch, with none announcement to traders, Tippetts and Hardy stopped growing the worth at which they bought SNP tokens.
Manipulation of SNP tokens was potential as a result of
Sharenode saved all SNP token transaction information in a database saved on a single server.
Sharenode’s exterior net builders, in addition to Hardy, knew that SNP token transactions weren’t recorded on any blockchain. Chelliah was a minimum of negligent in not realizing that SNP token transactions weren’t recorded on any blockchain.
Equally, NSG returns additionally didn’t truly exist.
Though Sharenode traders might see their NSG token balances growing, these transactions weren’t recorded on the NASGO blockchain.
Versus an precise blockchain, the place anybody can promote if there’s a purchaser, ShareNode/Nasgo withdrawals needed to undergo Tippetts.
Buyers couldn’t withdraw or promote their purported steadiness of NSG tokens with out approval from Tippetts, who needed to manually authorize any NSG token distribution course of, with rewards paid out of a pockets that Tippetts managed.
As the mathematics behind ShareNode and Nasgo inevitably spiralled uncontrolled, Tippetts and Chiang initiated a public change exit-scam.
This noticed the pair bribe BitForex, a dodgy Chinese language change run by CEO Jason Luo, with “a minimum of 100 BTC” for a list (then ~$615,000).
Unbeknownst to Sharenode traders, Tippetts and Chiang used a minimum of 50 bitcoins from Sharenode traders to pay BitForex to listing the NSG tokens.
In principle, this itemizing would permit NSG token holders to promote and commerce their digital securities with different market individuals.
I’m undecided what occurred however for some purpose BitForex was solely paid 50 BTC.
After the change listed NSG, Chiang and Tippetts spent one other 83 BTC of ShareNode investor funds to govern its worth.
Chiang and Tippetts typically communicated through WeChat. In these WeChat exchanges, Chiang defined to Tippetts what he
meant by “market making.”For instance, on January 26, 2019, Chiang wrote to Tippetts:
I’ve market making staff of 4 individuals. They work 24hrs shift [sic] to do it dude…Proper now our market cap is abt 300-400m usd so it is going to be high 20…We have now to fixed [sic] preserve this for 100 days then we are able to get into coinmarket cap
Chiang additional defined on January 26, 2019:
With the market making, quickly increasingly individuals within the public then the world will see the numeric worth of NSG…so with us sustaining on the present value vary…market ought to begin shopping for NSGs and compete for deloegates [sic]
Thus, Tippetts knew that Chiang managed and manipulated the worth and quantity of NSG tokens.
Tippetts additionally knew that Chiang and his market makers have been the “greatest gamers” in transacting NSG tokens on BitForex, but nobody related to NASGO ever advised traders that the overwhelming majority of NSG token buying and selling on BitForex was achieved by Chiang and his staff.
NSG did in actual fact pump upon itemizing in January 2019. NSG’s pump didn’t appeal to sufficient new suckers although, and so got here the inevitable dump.
A key element of Tippetts’s, Hardy’s, and Chelliah’s Sharenode gross sales pitch was the purported alternative to earn NSG token rewards,
which could possibly be monetized by promoting them on BitForex.In early April 2019, after some SNP token holders started promoting their NSG tokens on BitForex, Chiang despatched a WeChat message to Tippetts berating him for permitting these gross sales.
These gross sales flooded the market with so many NSG tokens that Chiang’s market makers couldn’t soak up the NSG tokens whereas nonetheless sustaining the worth of NSG tokens.
After getting repeatedly “pounded” by Chiang as their Ponzi scheme fell aside, Tippetts offloaded to Hardy.
On April 4, 2019, Tippetts wrote to Hardy:
Simply spoke to steve [Chiang]…he’s very involved we don’t have the funds to stabilize NSG because the NSG we’re sending out
individuals are promoting at approx $150-$300k a day.Steve’s working out of cash and may’t pay builders and preserve market shifting up.
On April 22, 2019, Tippetts despatched an iMessage to Hardy stating:
Steve pounded me once more final evening on nonetheless pushing withdrawals and retains crashing NSG. They’re mainly promoting and it’s
popping out of Steve’s pocket from market makers.I’ve to ship smaller chunks.
Ponzi math is Ponzi math although, and on Could third 2019 ‘Chiang and Tippetts halted all NSG token withdrawals from the wallets of SNP token holders.’
BehindMLM documented the ShareNode and Nasgo collapse 5 days afterward Could eighth.
Throughout three claims of reduction, the SEC is suing Steven Chiang, Eric Tippetts, James Hardy and Maurice Chelliah for securities fraud.
Particularly violations of
- Part 10(b) of the Change Act (Chiang, Tippetts and Hardy);
- Part 17(a) of the Securities Act (all defendants); and
- Part 5(a) and (c) of the Securities Act (all defendants)
The SEC is looking for a everlasting injunction in opposition to the defendants, in addition to digorgement of ill-gotten positive factors and civil penalties.
BehindMLM reviewed ShareNode and Nasgo in January 2019, roughly 5 months earlier than it collapsed.
The conclusion of our assessment was ShareNode, Nasgo and its executives have been engaged in securities fraud.
It ought to be painfully apparent that NSG and SNP tokens are securities. ShareNode associates are investing in SNP on the expectation of a passive return, which is interwoven with SNG tokens.
To function legally within the US, ShareNode and Nasgo must register their respective tokens with the SEC.
On the time of publication neither ShareNode, Nasgo, Stephen Chiang, Eric Tippets or James Hardy are registered with the SEC.
Because of this on a base degree, ShareNode and Nasgo are committing securities fraud.
There are 399 feedback on BehindMLM’s ShareNode assessment as I write this. Many are from ShareNode/Nasgo traders, who on the time have been adamant I used to be incorrect.
Oz? Are you actually in your proper mind set? you’ll be able to’t even be constant.. you contradict your very personal “analyses”..!
As occurs in each MLM Ponzi scheme, right here’s what occurred to funds invested in Nasgo and ShareNode.
In the end, Chiang, Tippetts, Hardy, and Chelliah would line their pockets with investor funds to make use of for varied private bills.
Sharenode and NASGO by no means had devoted company financial institution accounts.
As an alternative, tens of millions of {dollars} from traders flowed into quite a few financial institution accounts and cryptocurrency wallets instantly managed by Tippetts, Hardy, Chelliah, and others, in addition to Hardy’s PayPal account.
An evaluation of the exercise in these accounts reveals that Tippetts acquired a minimum of $1.5 million of proceeds from Sharenode and NASGO investor funds, Hardy stored a minimum of $1.3 million, and Chelliah stored over $200,000.
They used these misappropriated funds for mortgage funds, automobile purchases and leases, bank card funds, private mortgage funds, and varied residing bills.
Moreover, Tippetts triggered the switch of tons of of bitcoins to wallets purportedly managed by Chiang.
In WeChat messages dated December 15, 2018 and January 17, 2019, Chiang acknowledged receiving greater than $1 million of Sharenode investor funds from Tippetts.
The remaining was paid out to numerous insiders and promoters of the Ponzi scheme.
After scamming customers out of tens of millions, Eric Tippetts tried to rebrand himself by hiding behind kids’s charity.
Steven Chiang fled to Asia (the SEC cites Chiang as a US visa holder residing in Singapore). There he went on to launch the World Sponsorship Community Ponzi scheme in late 2020.
As of mid 2021 World Sponsorship had collapsed twice. The third reboot doesn’t seem to have taken off.
James Hardy employed a lawyer to threaten anybody who complained about ShareNode and Nasgo investor losses.
It’s by means of correspondence between Hardy’s lawyer and BehindMLM reader in late 2019, that we discovered the SEC was investigating.
As cited by the SEC of their grievance;
In 2019, Hardy pled responsible to felony fraud in California for misappropriating funding funds from an aged shopper, as a part of an unrelated scheme.
I went searching for particulars on this case to plot a timeline in opposition to Hardy’s lawyer’s threats. Oddly sufficient I couldn’t discover something.
Maurice Chelliah (proper), who additionally goes by Butch Chelliah, appears to have stored a comparatively low profile after ShareNode and Nasgo.
Once more, as cited by the SEC of their grievance;
From 2001 by means of 2013, Chelliah held Collection 6, 26, and 63 securities licenses and was related to a number of registered broker-dealers from 2000 to 2010. In 2013, the Monetary Business Regulatory Authority (“FINRA”) barred Chelliah for mishandling investor funds.
Go determine.
I’ve added the SEC’s Nasgo/ShareNode case to BehindMLM’s calendar. Keep tuned for updates…
Replace eleventh Could 2022 – On Could 2nd the SEC filed two motions for judgment, one in opposition to Maurice Chelliah and the opposite in opposition to Eric Tippetts.
The motions have been stricken from the document resulting from points with native guidelines relating to the filings. One thing about consenting to “Justice of the Peace Choose jurisdiction”, which wasn’t achieved.
As on the time of the replace there have been no additional filings. I’m assuming sooner or later the SEC’s judgment motions can be refiled with the proper signatures.
Sadly because the motions have been stricken, I don’t have entry to the unique filings to see the consented to judgments (successfully settlements).
Replace twelfth September 2022 – Eric Tippetts has settled the SEC’s fraud prices in opposition to him.
As of August thirty first, Steve Chiang has been served through his New York legal professional.
Replace twenty fourth December 2022 – The SEC has secured judgment in opposition to Maurice Chelliah.
Pending ongoing settlement discussions, Steve Chiang has been given until January twenty seventh to file a response to the SEC’s Grievance.