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Interim CEO of Riot Blockchain moves to distance the company from SEC probe into ex-CEO

Last updated: 16:48 11 Sep 2018 EDT, First published: 16:30 11 Sep 2018 EDT

A bitcoin
The SEC charged former chief John O'Rourke and former Riot investor Barry Honig with taking part in pump-and-dump schemes

Chris Ensey, Riot Blockchain’s new interim CEO, says the biotech-turned-blockchain company is trying to be as “open and transparent” to shareholders and regulators as it can in the wake of the filing of securities fraud charges against its ex-CEO John O’Rourke and its former shareholder Barry Honig.

“None of those named folks [by the SEC] have a controlling interest now in the company,” Ensey said in a telephone interview with Proactive Investors. “We’re going to keep plowing ahead and keep growing the company and doing the right thing.”

Formerly Riot’s chief operating officer, Ensey was tapped this week to take the helm of the Colorado-based company after the Securities and Exchange Commission charged that Riot’s former chief John O’Rourke was involved in overseeing a series of long-running pump-and-dump schemes.

Read: Riot Blockchain names new CEO amid management shakeup after alleged securities fraud

The SEC on Friday unveiled charges against 10 individuals and their associated organizations with taking part in fraudulent schemes being run out of South Florida that generated as much as US$27mln.

The fraudulent operation, which involved O’Rourke, was led by investor Barry Honig, formerly Riot’s biggest shareholder, according to the SEC.

This group of “microcap fraudsters,” the SEC says, are accused of manipulating the share prices of stocks in three unidentified companies by acquiring large quantities of shares in the stock at deep discounts.

After doing so, Honig and his associates illegally promoted the stocks and engaged in manipulative trading to artificially boost the price of shares and create the appearance of active trading volumes, according to the SEC.

Shares were then dumped to the inflated market to allow for the reaping of millions of dollars in profits at the expense of other investors.

Ensey stressed that Riot Blockchain was not accused by the SEC of wrongdoing. “We’re not mentioned in those charges, that investigation is outside of our purview,” he told Proactive.

However, the Colorado-based company, which saw its stock price soar after changing its focus to cryptocurrency, has been subpoenaed by the SEC for information regarding its registration statements.

In its last quarterly filing, Riot stated: “The company is engaged in conversations with staff of the Division of Enforcement, Division of Investment Management and Division of Corporation Finance about their concerns and intends to cooperate fully with the examination.”

Ensey declined to discuss the SEC subpoena.

Riot shares closed at US$4.21 Tuesday, down 1.9% on the day.

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