For the first time ever, the US Financial Industry Regulatory Authority has charged a Massachusetts resident with securities fraud for conducting an unregistered token sale. The complaint specifically targets HempCoin, which was being offered as a representing token of a worthless company, called Rocky Mountain Ayre.

The complaint directly names Timothy Tilton Ayre, of Agawam, Massachusetts, with committing securities fraud and unlawful distribution of an unregistered cryptocurrency offering, called HempCoin.

According to the FINRA announcement, Ayre first bought the rights to HempCoin in June of 2015, and rebranded it as a security offering in, what is now known to be, a worthless company. Ayre also made multiple false statements regarding the profitability of the company. Shares in the company were offered on the Pink Market of OTC Markets Group.

The coin was marketed by Ayre as “the first minable coin backed by marketable securities,” also claiming that HempCoin was “the world’s first currency to represent equity ownership.” These types of claims alerted authorities to the offering of unregistered securities in a non-existent company.

FINRA notes that “Investors mined more than 81 million HempCoin securities through late 2017 and bought and sold the security on two cryptocurrency exchanges,” and that they are charging Ayre with “the unlawful distribution of an unregistered security because he never registered HempCoin and no exemption to registration applied.”

FINRA is also accusing Ayre of defrauding Rocky Mountain Ayre investors by making false statements regarding the nature of the business and failing to disclose the creation and unlawful distribution of HempCoin, and for covering up these actions in the company’s financial statements.

FINRA importantly notes that there are multiple penalties that can be incurred from these charges, and that the accused can protest the accusations before a FINRA disciplinary panel:

“Under FINRA rules, a firm or individual named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible remedies include a fine, censure, suspension or bar from the securities industry, disgorgement of gains associated with the violations and payment of restitution.”

It is unclear at this time what the charges will ultimately result to for Ayre, but the charges likely represent the first of many to be filed against fraudulent cryptocurrency offerings, especially those that appear to be unregistered securities.