In brief SEC has filed charges against Dropil over its 2018 ICO.

SEC is seeking disgorgement of the $1.8 million the company raised.

Dropil is the latest ICO-funded crypto startup in a long list that the SEC has targeted.

The Securities and Exchange Commission (SEC) today filed charges against Dropil, Inc. and its founders—Patrick O’Hara, Jeremy McAlpine and Zachary Matar—in a federal California court for allegedly defrauding investors and hosting an unregistered initial coin offering (ICO). The SEC is seeking disgorgement of Dropil’s ICO funds, injunctive relief, and other civil penalties.

In a press release, the SEC said Dropil, Inc. sold its cryptocurrency—known as DROP tokens—between January and March of 2018, raising more than $1.8 million from investors. The SEC’s complaint alleges that Dropil and its founders informed participants that their money would be pooled together by a trading bot known as Dex, and that the funds would be combined to trade assorted digital currencies using a Dropil-designed algorithm.

According to the SEC, however, none of that ever happened.

The Commission claims that despite telling participants that they would receive profits every 15 days, Dropil diverted investor funds to the founders’ personal bank accounts and other projects. In the meantime, the company allegedly created false reporting statements to cover its tracks while paying Dex users with DROP tokens.

“There is no record that Dex, which Dropil promoted as a differentiating feature of DROPs, ever operated or generated any trading profits,” the SEC said in court documents.

Over the last few years, the SEC has been systematic in its approach to allegedly illegal fundraising conducted by crypto startups.

In February, the Commission took action against Enigma—a project that offers privacy for decentralized applications (dapps). The SEC said Enigma misled investors during a 2017 ICO that earned as much as $45 million. In settling with the SEC, Enigma agreed to pay back all funds to harmed investors, as well as a $500,000 penalty.

Similarly, in December, the SEC filed charges against Shopin CEO Eran Eyal for allegedly “defrauding” investors through an ICO in 2017 that garnered $42 million. The SEC said that Eyal failed to register the sale with the organization and spent investor funds on personal expenses.

Interestingly, in today’s action against Dropil, the SEC notes that the firm had claimed to raise $54 million in its ICO from more than 34,000 investors. According to the SEC, the company raised only a tiny fraction of the purported amount from a mere 2,500 investors.