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`Case 3:20-cv-04188 Document 1 Filed 06/25/20 Page 1 of 20
`
`A. KRISTINA LITTMAN (NJ Bar No. 04350-2005)
`STEVEN D. BUCHHOLZ (Cal. Bar No. 202638)
` buchholzs@sec.gov
`MARC D. KATZ (Cal. Bar No. 189534)
` katzma@sec.gov
`ALICE L. JENSEN (Cal. Bar No. 203327)
` jensena@sec.gov
`
`Attorneys for Plaintiff
`SECURITIES AND EXCHANGE COMMISSION
`44 Montgomery Street, Suite 2800
`San Francisco, CA 94104
`(415) 705-2500
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN FRANCISCO DIVISION
`
`SECURITIES AND EXCHANGE COMMISSION,
`Plaintiff,
`
`Case No.
`
`v.
`
`NAC Foundation, LLC and ROWLAND MARCUS
`ANDRADE,
`
`COMPLAINT
`
`
`Defendants.
`
`Plaintiff Securities and Exchange Commission (the “Commission”) alleges:
`SUMMARY OF THE ACTION
`This case involves the fraudulent and unregistered offer and sale of digital asset
`1.
`securities by Defendant NAC Foundation, LLC (“NAC”), a company that was in early-stage
`development of a blockchain-based digital token called AML BitCoin, which NAC claimed was
`superior to the original bitcoin because it had purported anti-money laundering, know-your-
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

`

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`Case 3:20-cv-04188 Document 1 Filed 06/25/20 Page 2 of 20
`
`
`customer, and other security features encoded in the smart contracts for the token and was
`purportedly compliant with regulatory requirements relating to cryptocurrencies, including in the
`United States. NAC’s founder and Chief Executive Officer, Defendant Rowland Marcus
`Andrade (“Andrade”), was the primary architect and beneficiary of the fraudulent offering, and
`with lobbyist and consultant Jack Alan Abramoff (“Abramoff”), NAC and Andrade promoted
`the offering and raised at least $5.6 million from approximately 2,400 retail investors, primarily
`in the United States, from at least August 2017 through December 2018. The Commission has
`filed a separate action against Abramoff.
`2.
`The tokens NAC offered and sold during the offering, including through an initial
`coin offering (“ICO”) phase to the general public between October 2017 and February 2018,
`constituted a “security” under the federal securities laws. The definition of “security” includes a
`range of investment vehicles, including “investment contracts.” Investment contracts are
`instruments involving the investment of money in a common enterprise with the reasonable
`expectation of profits to be derived from the entrepreneurial or managerial efforts of others.
`Investors in Defendants’ offering reasonably viewed the offering as an opportunity to profit if
`NAC and Andrade were successful in further developing the advertised features of the token and
`blockchain.
`3.
`NAC’s offering materials falsely stated that while the proprietary anti-money
`laundering, know-your-customer, and other security features of AML BitCoin had already been
`developed, certain additional features of the token and NAC’s “privately regulated public
`blockchain” were still being completed. As a result, NAC stated that it would initially issue
`tokens with the symbol ABTC (“ABTC tokens”) that could eventually be exchanged one-for-one
`for functional AML BitCoin tokens. NAC issued the ABTC tokens in May 2018, and NAC took
`steps to make the tokens available for trading on third-party digital asset trading platforms. The
`ABTC tokens became available for trading on at least one such platform beginning in May 2018.
`4.
`At no time did the ABTC tokens have any use. NAC did not have a platform
`where the ABTC tokens could be used to purchase goods or services or transact any business,
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-2-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

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`Case 3:20-cv-04188 Document 1 Filed 06/25/20 Page 3 of 20
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`they could only be exchanged for other digital assets or fiat currencies on certain third-party
`digital asset trading platforms. NAC marketed the ABTC tokens to investors who reasonably
`viewed them as a speculative, tradeable investment vehicle that might appreciate in value based
`on NAC’s and Andrade’s managerial and entrepreneurial efforts. The AML BitCoin White
`Paper, which Andrade wrote and posted on the AML BitCoin website, stated that AML BitCoin
`could “appreciate in value through speculative trading … .”
`5.
`NAC and Andrade deceived investors in the offering by making it appear as if
`NAC had successfully developed the anti-money laundering, know-your-customer, and other
`security features of the AML BitCoin token. In reality NAC had not developed any of these
`features and the company needed to raise significant funds for such development. They deceived
`investors by, among other things, making false and misleading statements in press releases,
`social media posts, and other promotional materials regarding the status of the technology and
`governmental agencies’ interest in using AML BitCoin in their payment systems. Many of these
`false and misleading statements were also disseminated through paid articles that Abramoff
`arranged and helped write, which purported to be written by independent authors rather than
`disclosing that they were paid promotions of NAC.
`6.
`NAC, Andrade, and Abramoff also deceived investors by making false and
`misleading statements in press releases and other promotional materials suggesting they were on
`the verge of airing a Super Bowl commercial for AML BitCoin that they falsely claimed was
`rejected by the National Football League and NBC because of its political content.
`7.
`Andrade also directly made false and misleading statements to investors and
`potential investors about many aspects of NAC’s business, including the development status of
`the AML BitCoin token, NAC’s financial condition, and purported interest by and negotiations
`with governmental agencies for use of AML BitCoin in their payment systems. These
`statements were made with the intent to deceive or with reckless disregard for the truth.
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-3-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

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`
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`
`8.
`NAC and Andrade also misrepresented to investors that NAC’s technology was
`superior to the original bitcoin, compliant with regulatory requirements, and nearly ready for use
`in payment systems.
`9.
`At all times, however, NAC and Andrade were aware, and during the ICO
`Abramoff became aware, that NAC had not developed any of the claimed features of the AML
`BitCoin tokens and that NAC only had introductory meetings with governmental agencies, none
`of which had led to follow-up meetings or negotiations about potential use of the tokens in the
`agencies’ systems. NAC, Andrade, and Abramoff also were aware at least by January 2018 that
`NAC could not pay for a Super Bowl advertisement, and that the commercial they produced for
`AML BitCoin had not been rejected by the National Football League or NBC.
`10.
`Andrade also took steps to manipulate the market for ABTC tokens and
`artificially increase the trading volume and value of the ABTC tokens on digital asset trading
`platforms.
`11.
`During the offering, Andrade misappropriated approximately $1.1 million of the
`offering proceeds for his personal use, including approximately $747,000 to purchase a personal
`residence, $69,000 to buy a Cadillac Escalade, $60,000 to buy a Ford F250 truck, and $226,150
`to buy a property for his father.
`12.
`In this action, the Commission seeks injunctions; disgorgement of ill-gotten
`gains, with prejudgment interest; civil monetary penalties; and other appropriate relief. Unless
`NAC and Andrade are permanently restrained and enjoined, they will continue to engage in the
`acts, practices, and courses of business set forth in this complaint and in acts, practices, and
`courses of business of similar type and object.
`JURISDICTION AND VENUE
`13.
`The Commission brings this action pursuant to Sections 20(b), 20(d), and 22(a)
`of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)] and
`Sections 21(d), 21(e), and 27 of the Securities Exchange Act of 1934 (“Exchange Act”)
`[15 U.S.C. §§ 78u(d), 78u(e), and 78aa].
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-4-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

`

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`14.
`This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d)(1)
`and 22(a) of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d)(1), and 77v(a)] and Sections 21(d),
`21(e) and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e) and 78aa].
`15.
`Defendants, directly or indirectly, made use of the means and instrumentalities of
`interstate commerce or of the mails in connection with the acts, transactions, practices, and
`courses of business alleged in this complaint.
`16.
`Venue is proper in this District pursuant to Section 22(a) of the Securities Act
`[15 U.S.C. § 77v(a)] and Section 27(a) of the Exchange Act [15 U.S.C. § 78aa(a)]. Acts,
`transactions, practices, and courses of business that form the basis for the violations alleged in
`this complaint occurred in this District. Defendants met with and solicited prospective investors
`in this District, and offers and sales of securities took place in this District.
`17.
`Under Civil Local Rule 3-2(d), this civil action should be assigned to the San
`Francisco Division, because a substantial part of the events or omissions which give rise to the
`claims alleged herein occurred in San Francisco County.
`DEFENDANTS
`NAC Foundation, LLC is a Nevada limited liability company formed in 2014
`18.
`with its principal place of business in Las Vegas, Nevada. NAC is wholly owned and controlled
`by Andrade.
`Rowland Marcus Andrade, age 42, of Missouri City, Texas, is the Chief
`19.
`Executive Officer (“CEO”), President, founder, and sole owner of NAC.
`OTHER RELEVANT INDIVIDUAL
`Jack Alan Abramoff, age 61, of Silver Spring, Maryland, is a lobbyist and
`20.
`consultant who provided services to NAC during the offering.
`FACTUAL ALLEGATIONS
`A.
`The Securities Registration Requirements and NAC’s Offering
`21.
`Congress enacted the Securities Act of 1933 to regulate the offer and sale of
`securities. In contrast to ordinary commerce, which often operates under the principle of caveat
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-5-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

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`emptor, Congress enacted a regime of full and fair disclosure, requiring those who offer and sell
`securities to the investing public to provide sufficient, accurate information to allow investors to
`make informed decisions before they invest. Such disclosure is ordinarily provided in a
`“registration statement,” which provides public investors with, among other things, financial and
`managerial information about the issuer of the securities, details about the terms of the securities
`offering, the proposed use of investor proceeds, and an analysis of the risks and material trends
`that would affect the enterprise.
`22.
`Section 5(a) of the Securities Act [15 U.S.C. § 77e(a)] provides that, unless a
`registration statement is in effect as to a security or an exemption from registration applies, it is
`unlawful for any person, directly or indirectly, to sell securities in interstate commerce. Section
`5(c) of the Securities Act [15 U.S.C. § 77e(c)] provides a similar prohibition against offers to sell
`or offers to buy, unless a registration statement has been filed. If a violation of Sections 5(a) or
`5(c) is established, a defendant may avoid liability by proving that the securities offering
`qualified for a registration exemption. Thus, Sections 5(a) and 5(c) of the Securities Act prohibit
`the unregistered offer or sale of securities in interstate commerce absent an applicable
`exemption.
`23.
`In a variety of circumstances, courts have found that investment vehicles other
`than traditional stocks and bonds constitute investment contracts and therefore securities. As the
`Supreme Court of the United States has noted, Congress defined “security” broadly to embody a
`“flexible rather than a static principle, one that is capable of adaptation to meet the countless and
`variable schemes devised by those who seek the use of the money of others on the promise of
`profits.”
`24.
`On July 25, 2017, the SEC issued what is often called the “DAO Report.” The
`DAO Report “advise[d] those who would use . . . distributed ledger or blockchain-enabled means
`for capital raising, to take appropriate steps to ensure compliance with the U.S. federal securities
`laws,” and found that digital assets at issue in that matter were investment contracts and therefore
`securities.
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-6-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

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`25.
`Beginning in at least August 2017 and continuing through at least December
`2018, NAC, Andrade, and Abramoff offered and sold digital asset securities. NAC initially
`issued ABTC tokens, which had no use during the offering and purportedly could eventually be
`exchanged one-for-one for functional AML BitCoin tokens. The offering materials touted the
`prospect that NAC’s efforts to further develop the AML BitCoin token and blockchain, and to
`establish relationships with third parties for use of AML BitCoin in their payment systems,
`would increase demand for AML BitCoin and yield profits for buyers. They also emphasized
`that only a finite number of ABTC and AML BitCoin tokens would be created, such that rising
`demand for the tokens would cause their value to appreciate.
`26.
`NAC assured prospective buyers that, following distribution of the initial ABTC
`tokens, buyers would be able to trade the tokens on various digital asset trading platforms,
`enabling conversion of the tokens to other digital assets, such as bitcoin or ether, or to fiat
`currency, such as U.S. dollars.
`27.
`NAC raised at least $5.6 million during the offering from approximately 2,400
`retail investors, primarily in the United States. Investors’ funds were pooled in NAC’s accounts
`and digital asset wallets and used to fund NAC’s business, including for the further development
`of AML BitCoin and NAC’s own blockchain.
`28.
`Under the federal securities laws, NAC, Andrade, and Abramoff offered and sold
`securities from at least August 2017 through December 2018. But NAC has never filed a
`registration statement with the SEC for its offer and sale of securities, and no exemptions from
`registration were available. By failing to prepare and file a registration statement, NAC did not
`provide important information to investors regarding the investment opportunity promoted by
`NAC, such as information about NAC’s poor financial condition, future plans of operation and
`budget, the proposed use of investor proceeds, and detailed disclosure of material trends and the
`most significant factors that made the offering speculative and risky. NAC thus failed to disclose
`information relevant for investors to evaluate NAC’s promises and representations about the
`investment potential of the ABTC tokens and the AML BitCoin project.
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-7-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

`

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`B.
`Background of NAC and Its Development of AML BitCoin
`29.
`NAC began posting materials promoting AML BitCoin and the upcoming ICO
`on its website, through social media outlets, and by paying authors to write positive articles about
`AML BitCoin in or about August 2017. Andrade wrote the White Paper describing the offering
`and the development of AML BitCoin and posted it on NAC’s website, which was accessible to
`the investing public worldwide, on October 4, 2017. The White Paper and NAC’s website
`represented that NAC had developed and launched a predecessor to AML BitCoin, called Aten
`Coin, in September 2015, which NAC claimed was the first “cryptocurrency” designed to be
`anti-money laundering and anti-terrorist compliant and theft-resistant. NAC falsely claimed that
`this functionality was encoded in the token and built based on patent-pending technology that
`Andrade licensed to NAC.
`30.
`The White Paper misrepresented that “AML BitCoin was created with anti-
`money laundering, anti-terrorism and theft-resistant properties built into the code of the coin, and
`as a result, it is compliant with a host of laws, including but not limited to: Anti-Money
`Laundering (AML), Counter Financing of Terrorism (CFT), Anti-Fraud and Financial Crimes
`(AFF), Office of Foreign Assets Control (OFAC), Bank Secrecy Act (BSA), USA PATRIOT
`Act and the FACT Act.”
`31.
`The White Paper further misstated that “[u]sing proprietary technology, this
`identity-based digital currency is compliant with laws, statutes, rules, and regulations that
`govern, regulate, and relate to preventing money-laundering, terrorism, identity theft, financial
`crimes, and know-your-customer laws.”
`32.
`NAC also claimed that it was developing its own blockchain that would include
`additional features, such as certified digital identity verification, through a “white label
`AML/KYC Platform.” NAC referred to this blockchain as a “privately regulated public
`blockchain,” which it claimed would be faster and more efficient than the original bitcoin
`blockchain.
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-8-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

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`33.
`The White Paper stated that the process of integrating the AML BitCoin token
`features into the new blockchain was ongoing, and that purchasers in the offering would first
`receive ABTC tokens that could be traded on various platforms but would not have any of the
`features of AML BitCoin. NAC represented to purchasers that they could exchange the ABTC
`tokens for functional AML BitCoin tokens on a one-for-one basis as soon as the new blockchain
`and tokens were ready.
`34.
`A November 22, 2017 press release stated “NAC Foundation’s just launched a
`dynamic digital currency, the AML BitCoin, which is the only cryptocurrency running on a
`privately regulated blockchain and using biometric identification protocols, including voice
`recognition, to verify the owners of AML BitCoin cryptowallets.”
`C.
`NAC Offered and Sold Digital Asset Securities in an Unregistered Offering
`35.
`Between at least August 2017 and December 2018, including during the ICO
`phase from October 2017 through February 2018, NAC sold the ABTC tokens to raise capital for
`the enterprise. ABTC tokens could be purchased with fiat currency, bitcoin, ether, litecoin, and
`other digital assets at prices ranging from $0.35 to $0.45 per token in the pre-sale phase of the
`offering prior to the ICO phase, then at prices ranging from $1.00 to $1.50 per token in the ICO
`and after.
`36.
`NAC advertised the ABTC tokens as being available for purchase by individuals
`in the United States and worldwide through the AML BitCoin website, Facebook, Telegram, and
`other internet forums and social media pages.
`37.
`According to the White Paper, NAC generated a total of 200 million ABTC
`tokens, of which 76 million were available for purchase in the offering, which aimed to raise
`$100 million. The remainder of the ABTC tokens were retained by NAC and its administration
`team, including Andrade. NAC ultimately raised at least $5.6 million from approximately 2,400
`primarily domestic, retail investors during the offering.
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-9-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

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`38.
`After the ICO, NAC took steps to make the ABTC tokens available for trading on
`various digital asset trading platforms. ABTC tokens began trading on one such platform in May
`2018 and later became traded on at least two additional platforms.
`D.
`NAC Marketed the Tokens as an Investment
`39.
`NAC marketed the ABTC tokens and the offering in a manner consistent with an
`investment. Purchasers would have reasonably viewed the offering as an opportunity to profit if
`Andrade and NAC were successful in their entrepreneurial and managerial efforts to further
`develop the advertised features of the token and blockchain. Based on NAC’s statements in the
`White Paper and on its website and in other online forums, purchasers would have reasonably
`believed they could pursue such profits by holding or trading the ABTC tokens they received in
`the offering.
`40.
`ABTC tokens had no use. NAC did not have a platform where ABTC tokens
`could be used to purchase goods or services or transact any business. Instead, its value derived
`entirely from trading on digital asset trading platforms. NAC marketed the offering to investors
`who would have reasonably viewed the ABTC tokens as a tradeable investment vehicle that
`might appreciate based on NAC’s and Andrade’s managerial and entrepreneurial efforts to
`develop the AML BitCoin and blockchain.
`41.
`In one of NAC’s social media channels, company representatives highlighted the
`availability of secondary market trading to attract investors. The White Paper also stated that
`“users may trade, sell and purchase [tokens] as they desire, including on participating exchanges
`and trading websites,” and “to speculate.”
`42.
`The NAC marketing plan was designed by Andrade and Abramoff to create
`demand and market price appreciation for the ABTC tokens independent of any use for the
`tokens. Defendants promoted the value of the ABTC tokens to investors based on the success of
`the token sale and the eventual demand for tokens if NAC and Andrade were successful in
`launching the blockchain and AML BitCoin, not on any utility of the ABTC tokens issued in the
`offering.
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-10-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

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`43.
`NAC tied the value of the ABTC token to purchasers’ ability to quickly resell it
`to other investors, not to any immediate utility. The White Paper explicitly stated that the tokens
`could “appreciate in value through speculative trading … .”
`E.
`NAC, Andrade, and Abramoff Made Materially False and Misleading
`Statements During the Offering
`44.
`NAC’s offering materials, press releases, social media posts, and marketing
`efforts directed by Andrade and Abramoff made materially false and misleading statements
`about the status of the technology and the status of purported negotiations with governmental
`agencies for use of AML BitCoin in their payment systems. They also designed a deceptive
`marketing scheme through which they filmed an advertisement for AML BitCoin, indicated that
`they were on the verge of purchasing an expensive spot to air the ad during the Super Bowl, and
`then falsely claimed that the ad was rejected by the NFL and NBC because of its political
`content. In reality, they lacked the funds for, and never intended to air, the Super Bowl ad.
`1.
`False or Misleading Statements About the Technology Development
`45.
`NAC’s marketing strategy for AML BitCoin, as reflected in its name, was to take
`advantage of the rising price of bitcoin in 2017 and tout the anti-money laundering, know-your-
`customer, anti-terrorism, and other security features that NAC falsely claimed had already been
`built into the code of the token. According to the White Paper authored by Andrade, “using
`proprietary technology, this identity-based digital currency is compliant with laws, statutes, rules,
`and regulations that govern, regulate, and relate to preventing money-laundering, terrorism,
`identity theft, financial crimes, and know-your-customer laws.”
`46.
`The White Paper also falsely claimed that NAC’s technology included a
`“personal legal identity-linked credential authentication protocol” that was built into the source
`code for the token. This protocol purportedly included “an integration of three major processes,
`including (i) personal identity verification, (ii) credential authentication, and (iii) a two-party
`signature scheme.”
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-11-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

`

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`Case 3:20-cv-04188 Document 1 Filed 06/25/20 Page 12 of 20
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`47.
`In reality, NAC’s technology for the AML BitCoin token did not have the anti-
`money laundering, know-your-customer, and other capabilities as claimed during the offering.
`Andrade retained a project manager and a series of software and blockchain developers during
`and after the offering to design a development plan and start developing the features that the
`offering materials claimed NAC’s technology already contained, but Andrade quickly stopped
`paying each of these individuals and they made no progress in developing the features.
`48.
`NAC never developed the technology for the tokens to integrate biometric or
`other capabilities associated with personal identity verification or a multi-party signature
`protocol.
`49.
`Andrade was aware at all times during the offering that NAC’s claimed
`technology did not yet exist, and that the offering and marketing materials claiming that NAC
`had already developed these features for AML BitCoin were false. Abramoff also became aware
`during the offering that NAC’s offering and marketing materials contained false or misleading
`statements about the technology for the AML BitCoin tokens and the status of the development.
`50.
`Communications between Andrade and Abramoff during the ICO acknowledged
`that “our whole system is non-existent so far” and that “our product has to be started from
`scratch.” They also acknowledged that AML BitCoin’s predecessor Aten Coin was a failure and
`that they had been unable to develop the identity verification features as of that time.
`51.
`Defendants’ statements about the capabilities of the AML BitCoin technology
`and the status of development of the project would have been important to investors because
`these features were touted as improvements to existing technologies, which was a principal basis
`upon which they were led to reasonably expect profits on their investments.
`2.
`False or Misleading Statements About Negotiations with the Panama
`Canal Authority
`52.
`As part of Defendants’ fraudulent scheme, Andrade and Abramoff designed a
`strategy to obtain introductory meetings with prospective governmental customers and then
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-12-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

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`Case 3:20-cv-04188 Document 1 Filed 06/25/20 Page 13 of 20
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`NAC and Andrade misrepresented the nature of the meetings as negotiations in press releases to
`generate interest in the offering.
`53.
`In a September 13, 2017 press release, NAC claimed that its Vice President of
`Latin America Affairs “has already commenced negotiations with a number of Latin American
`Governments, including Panama, to incorporate AML BitCoin in their payment and finance
`structures.” Andrade told Abramoff that negotiations with the Panama Canal Authority were
`underway, and Abramoff arranged for NAC to compensate an author, who did not disclose that
`he was being paid by NAC, to publish an article on September 20, 2017 stating that NAC had
`“commenced groundbreaking discussions with the Panama Maritime Authority to use AML
`BitCoin in their payment structures … .”
`54.
`In a November 8, 2017 press release drafted by Abramoff and published by
`Andrade, NAC stated that it “has been engaged in talks with Panamanian government and
`private sector representatives to introduce AML BitCoin into the national financial and payment
`infrastructures,” that NAC “has been working with … the President of the Board of Directors
`and Minister of the Panama Canal, to introduce the new currency as one of the Canal transit fee
`e-payment options,” and that “NAC Foundation executives have been talking with key Panama
`Canal officials about the possibility of integrating the digital identity verification solutions built
`into AML BitCoin into the payment systems which will be used by thousands of crews working
`on ships sailing under Panama’s flag.”
`55.
`Andrade and Abramoff also each stated to prospective investors that NAC had
`deals “in place” or “locked up” with the Panama Canal Authority whereby AML BitCoin would
`be the only digital asset accepted for passage fees through the Canal.
`56.
`However, as Andrade knew, no negotiations had commenced. On November 9,
`2017, the day after NAC’s press release, a representative of the Panama Canal Authority wrote to
`NAC stating that they had seen NAC’s press release, reminding NAC that “the meeting
`mentioned in the release still has not yet taken place,” and concluding that “this press release is
`misleading as no talks have taken place with Canal executives.”
`
`COMPLAINT
`SEC V. NAC FOUNDATION, LLC, ET AL.
`
`
`
`-13-
`
`SECURITIES AND EXCHANGE COMMISSION
`44 MONTGOMERY STREET, SUITE 2800
`SAN FRANCISCO, CA 94104 ‖ (415) 705-2500
`
`

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`3.
`
`False or Misleading Statements About Negotiations with the Port of
`San Francisco
`57.
`Andrade also arranged to have an introductory meeting with officials from the
`Port of San Francisco and paid authors recruited by Abramoff to publish articles misrepresenting
`the nature and outcome of the meeting. In a September 20, 2017 article, the same author who
`wrote the misleading article about the Panama Canal Authority reported that officials at the Port
`of San Francisco “are considering using [AML BitCoin] in the seaport’s passage and docking
`fees and other payment structures.” The same author wrote in an October 3, 2017 article that
`“AML BitCoin has already made inroads in so many places where old Bitcoin would never be
`welcome. Such as the Port of San Francisco…” He repeated the same statements in a February
`2, 2018 article.
`58.
`Andrade also directly misrepresented in sol