US SEC Charges California-Based Fraudster With Selling Insider Tips on the Dark Web


Sunday, March 21, 2021   /07:38 AM / By US SEC  / Header Image Credit: Forbes


The Securities and Exchange Commission charged James Roland Jones of Redondo Beach, California, with perpetrating a fraudulent scheme to sell what he called "insider tips" on the dark web.  The dark web allows users to access the internet anonymously and, as such, has often been used to host websites and marketplaces that support or promote illegal activity.  This is the SEC's first enforcement action involving alleged securities violations on the dark web.


The SEC's complaint alleges that, in late 2016 and 2017, Jones accessed various dark web marketplaces, including a website claiming to be an insider trading forum, in search of material, nonpublic information to use for his own securities trading.  According to the complaint, in order to gain access to the insider trading forum, Jones lied about possessing material, nonpublic information.  By doing so, Jones allegedly gained access to the insider trading forum for a short period, but was unsuccessful in obtaining valuable material, nonpublic information. 


The complaint further alleges that Jones subsequently devised a scheme to sell purported insider tips to others on the dark web.  The SEC alleges that, in the spring of 2017, Jones offered and sold on one of the dark web marketplaces various purported "insider tips" that he falsely described as material, nonpublic information from the insider trading forum or corporate insiders.   According to the complaint, several users paying in bitcoin purchased these tips and ultimately traded based on the information Jones provided.


"This case shows that the SEC can and will pursue securities law violators wherever they operate, even on the dark web," said David L. Peavler, Director of the SEC's Fort Worth Regional Office.  "We have committed staff and technology to pierce the cloak of anonymity these wrongdoers try to throw over their crimes."


The SEC's complaint charges Jones with violating the antifraud provisions of the federal securities laws.  Simultaneous with the filing, Jones agreed to a bifurcated settlement that, subject to court approval, permanently enjoins him from further violating these provisions, and reserves the determination of disgorgement and civil penalties for a later date.


In a parallel action, the U.S. Attorney's Office for the Middle District of Florida filed criminal charges against Jones. 


The SEC's investigation was conducted by David Hirsch, Todd Baker, and Morgan Ward Doran, and supervised by Scott Mascianica and Eric Werner. The litigation will be led by Keefe Bernstein. The SEC appreciates the assistance of the U.S. Attorney's Office for the Middle District of Florida and the Federal Bureau of Investigation.


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