A Redondo Beach man was sued Thursday for an alleged scheme to sell what he called “insider tips” on websites that don’t appear on search engines, marking what’s billed as the Securities and Exchange Commission’s first enforcement action involving suspected securities violations on the dark web.
James Roland Jones, 33, allegedly accessed various dark web marketplaces, including a website claiming to be an insider trading forum, in search of private information to use for his own securities trading, according to the SEC.
The dark web allows users to access the internet anonymously and has often been used to host websites and marketplaces that support or promote illegal activity.
The SEC’s complaint alleges that, in late 2016 and 2017, Jones lied about possessing non-public information in order to gain access to the insider trading forum. Despite doing so, Jones was unsuccessful in obtaining valuable private information, according to regulators.
The complaint further alleges that Jones, using the moniker “MillionaireMike,” subsequently devised a scheme to sell purported insider tips to others on the dark web. The SEC alleges that, in the spring of 2017, Jones offered and sold on one of the dark web marketplaces various “insider tips” that he falsely described as private information from the insider trading forum or corporate insiders.
According to the complaint, several users paying in bitcoin purchased those “tips” and ultimately traded based on the information Jones provided.
“This case shows that the SEC can and will pursue securities law violators wherever they operate, even on the dark web,” said David L. Peavler, director of the SEC’s Fort Worth Regional Office. “We have committed staff and technology to pierce the cloak of anonymity these wrongdoers try to throw over their crimes.”
The SEC’s complaint charges Jones with violating the antifraud provisions of the federal securities laws. Simultaneous with the filing, Jones agreed to a settlement that, subject to court approval, permanently enjoins him from further violating these provisions, and reserves the determination of disgorgement and civil penalties for a later date.
In a parallel action, the U.S. Attorney’s Office for the Middle District of Florida filed criminal charges against Jones, who pleaded guilty in Tampa federal court to conspiracy to commit securities fraud. The charge carries a sentence of up to five years in federal prison.