The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against investment firm Touzi Capital, alleging that the company misled more than 1,200 U.S. investors about the liquidity and profitability of its crypto asset mining fund. The SEC claims the firm raised nearly $95 million through unregistered security offerings between 2021 and 2023, using deceptive tactics to lure investors.

According to the SEC’s statement on Nov. 29, Touzi Capital promoted the investment as a fund dedicated to crypto mining operations. However, the SEC alleges that the firm instead commingled investor funds across unrelated subsidiaries and ventures, many of which had no connection to crypto mining.

The regulator accused Touzi Capital of providing false assurances about the stability of the fund, likening it to high-yield money market accounts, despite the investments being “risky and illiquid.” The firm reportedly continued to solicit new investors even after the ventures began to fail, exacerbating the losses.

Legal action and ongoing scrutiny

The SEC’s charges against Touzi Capital follow a broader pattern of regulatory action in the cryptocurrency space. A growing number of crypto firms have been accused of misleading investors or failing to comply with U.S. securities laws.

This lawsuit comes shortly after a U.S. federal judge refused to dismiss an SEC case against Kristoffer Krohn, who allegedly promoted a fraudulent $18 million crypto mining scheme involving “Green Boxes.” The court rejected Krohn’s argument that the investments were not securities offerings, allowing the SEC’s case to proceed.

Future of SEC enforcement under political shifts

As legal battles between crypto firms and regulators escalate, some industry leaders speculate that a political shift could ease the pressure on the cryptocurrency industry. Joe Lubin, CEO of blockchain firm Consensys, suggested at DevCon 2024 in Thailand that SEC enforcement may decline if Donald Trump returns to the presidency.

“Maybe not all the cases, but I have a feeling our industry is going to save hundreds of millions of dollars going forward,” Lubin remarked, referencing the significant legal costs tied to regulatory disputes.

For now, the SEC’s crackdown on crypto-related fraud continues, with the agency seeking permanent injunctions, disgorgement of profits, and civil penalties against Touzi Capital. The case underscores the ongoing tension between regulatory oversight and the rapidly evolving cryptocurrency market.