SEC accused of fraud on court in explosive filings

Embattled digital asset influencer Reggie Middleton has accused the U.S. Securities and Exchange Commission (SEC) of fabricating evidence and lying to the courts in the regulator’s securities case against his company, according to a series of bombshell legal filings.

In what the filing calls a “profound betrayal of the judicial process,” the SEC is accused of fabricating and concealing evidence to secure an asset freeze against Middleton’s company Veritaseum—a freeze which ultimately forced Middleton to prematurely settle the case.

Middleton, was originally sued by the SEC along with his firm Veritaseum in 2019 over their VERI coin offering, calling it an unregistered securities offering and based on false and misleading statements made to investors. Veritaseum’s business accounts were frozen early in the litigation.

Following the asset freeze, Middleton and Veritaseum settled with the SEC for $9.5 million in 2019. $7,891,600 of this was disgorged profits, which was then topped up by $582,535 in interest and a $1,000,000 penalty applied to Middleton personally. The court also granted a series of injunctions that practically banished Middleton from the digital asset industry.

SEC lied to the court about money transfers

That would have been the end of the matter, but now Middleton has asked the court to vacate the 2019 settlement on the basis that the SEC has “committed fraud on the court through a calculated scheme that undermined judicial integrity.”

When it initially took action against Middleton and Veritaseum, the SEC demonstrated the urgency of the case by claiming that Middleton was secretly dissipating investor assets to his personal accounts. According to Middleton’s latest filings, this was a complete fabrication.

At the freeze hearing following the SEC’s initial enforcement action, SEC attorneys pointed to monetary transfers worth $2 million that were made by Middleton to what they said were personal accounts shortly after the SEC issued him with a Wells Notice (which notifies SEC targets of impending enforcement action).

Middleton’s attorneys said that these transfers were routine and had been occurring every six months for the past 18 months—something Middleton says the SEC knew but chose to dishonorably omit in its submissions to the court. Additionally, they said the accounts were not personal at all, but in the name of the company.

Unfortunately for Middleton, the SEC was successful in persuading the Judge, who froze Veritaseum business assets.

However, at a subsequent hearing, the SEC made further filings, which included additional evidence that Middleton now says corroborates his story about the payments.

This includes a report filed by the SEC’s blockchain expert Patrick Doody: buried at the bottom of a sworn statement canvassing VERI trading volumes, Doody admits that he was incorrect to previously characterize the destination accounts for the £2 million ($2.7 million) as belonging to Middleton when in fact the accounts were in the name of Veritaseum LLC.

This allegedly never got the chance to come up to court at the time, as Middleton and Veritaseum reached a settlement agreement with the SEC shortly thereafter.

According to Middleton’s latest filing accusing the SEC of fraud on the court:

“Defendants contend this outcome was coerced by the SEC’s misconduct before the Court, which froze Defendant’s assets based on a lie, that rendered Defendants unable to afford to be able to proceed with legal fees to continue its fight. In effect, but for the SEC obtaining the asset freeze, Defendants would have been able to defend the allegations and proceed in the normal course of due process.”

Further, Middleton accuses the SEC of fraudulently suppressing evidence in the case, including by intimidating witnesses who were willing to provide statements in support of Middleton and Veritsaeum.

One Veritaseum community member and Youtuber, Michael Sheahan, was subpoenaed by the SEC after submitting an affidavit in support of Middleton.

“The session turned ‘aggressive, abusive and threatening’, with threats of felony charges for his support and YouTube activity, halting his public advocacy and costing him channel ownership.”

The SEC also attempted to seize Sheahan’s devices.

Another supporter, Lloyd G. Cupp III, was approached by SEC attorneys and asked to testify against Veritsaeum. Cupp declined and insisted that VERI was a utility token and not a security. Middleton says…