SEC Files Fraud Charges in Bitcoin and Office Space Investment Schemes

The Securities and Exchange Commission today filed fraud charges against the clandestine founder of a purported Bitcoin platform and a chain of co-working spaces located in former bars and restaurants, alleging that he bilked investors in both companies while hiding his connection given his checkered past with regulators in the U.K. 

The SEC alleges that Renwick Haddow, a U.K. citizen living in New York, created a broker-dealer and did not register the firm with the SEC as required under the federal securities laws.  Haddow allegedly used sales representatives to cold call potential investors and sell securities in Bitcoin Store Inc. and Bar Works Inc.

According to the SEC’s complaint, offering materials presented to investors in both companies touted the backgrounds of senior executives who do not appear to exist.  The materials also misrepresented other key facts about both companies’ operations.  Haddow allegedly diverted more than 80 percent of the in funds raised by the broker-dealer for the Bitcoin Store, and sent more than $4 million from the Bar Works bank accounts to one or more accounts in Mauritius and $1 million to one or more accounts in Morocco.

“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,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.

The SEC alleges that materials provided to Bitcoin Store investors claimed it was “an easy-to-use and secure way of holding and trading Bitcoin” and had generated several million dollars in gross sales.  In fact, the SEC alleges that Bitcoin Store has 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.  According to the SEC’s complaint, the corporate address used for Bitcoin Store was Haddow’s residential address minus the apartment number.

According to the SEC’s complaint, 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.”  Bar Works primarily sold leases coupled with sub-leases that together functioned like investment notes.  The company also allegedly sold leases for more workspaces than actually existed in at least two locations.  Among false claims made to investors, who invested more than $37 million in the Bar Works scheme, were that a location was profitable within months of opening and that Bar Works had engaged an auditor. 

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Haddow. 

The SEC’s complaint filed in federal district court in Manhattan charges Haddow, Bitcoin Store, Bar Works, and another Haddow-controlled company called Bar Works 7th Avenue, Inc. with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  The complaint further alleges that Haddow is liable for aiding and abetting Bitcoin Store, Bar Works, and Bar Works 7th Avenue’s violations and as a control person for the registration violations of his brokerage firm InCrowd Equity Inc. 

The SEC has obtained an emergency asset freeze against all defendants and relief defendants in the case.

The SEC’s investigation is being conducted by Maureen P. King, Preethi Krishnamurthy, Neil Hendelman, and Sandeep Satwalekar.  The case is being supervised by Lara Shalov Mehraban.  The litigation will be handled by Ms. Krishnamurthy, Ms. King, and Christopher J. Dunnigan.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation.