Michael Kanovitz, a lawyer threatening to file a class action against Ben.eth, says the PSYOP scheme bear similarities to cases that have seen SEC enforcement.
Ben.eth, the pseudo-anonymous memecoin creator behind at least three controversial token launches in recent weeks, could fall under the crosshair of United States regulators, crypto lawyers suggest.
A previously little-known personality in the crypto community, Ben.eth has seen his Twitter following blow up nearly five-fold in May. The influencer has launched at least three memecoins in recent weeks — Ben Coin (BEN), PSYOP, and LOYAL.
Pre-sales of these memecoins — which require Ether (ETH) to be sent directly to the creator himself — have allowed Ben.eth to gather thousands of ETH. Currently, his wallet holds 10,946 ETH, equivalent to $20.8 million.
While Ben.eth’s supporters have defended the legitimacy of the token sales, others warn that the influencer’s actions could face the wrath of regulators and disgruntled investors alike.
Michael Kanovitz, a partner at Loevy & Loevy, told Cointelegraph that the Psyop launch “is a classic example of the concerns the SEC [U.S. Securities and Exchange Commission] has identified in actions like those against Kim Kardashian and Paul Pierce.”
Kanovitz recently sent a profanity-laden letter via NFT to Ben.eth threatening a class-action suit against him, alleging that the influencer “used a manipulative launch strategy” in the PSYOP presale.
To @eth_ben and @psyopeth :
My law firm, Loevy & Loevy, will be filing a class action against you in your IRL name if you do not refund all of the $PSYOP presale purchasers immediately.
Our settlement demand letter has served as an NFT to your ben.eth address, viewable here:… pic.twitter.com/qaxhECDUhb
— Mike Kanovitz (@MikeKanovitz) May 19, 2023
Kanovitz alleged that Ben promised Psyop’s returns on investment would be “several fold or greater” and claimed he “coordinated with other influencers to spread misinformation” and potentially manipulated the token’s price.
Pointing to BEN and LOYAL, Kanovitz said he’s “continuing to gather evidence” on the alleged scheme.
In comments to Cointelegraph, Michael Bacina, a lawyer and partner at Piper Alderman, said that the legal trouble Ben could find himself in depends on if the sales are investigated and what U.S. regulator carries out that investigation.
The Securities and Exchange Commission, for example, might believe the tokens are investment contracts — as it does with most other cryptocurrencies — and could consider them unregistered securities, which could see Ben face possible fines and penalties.
Cointelegraph has contacted Ben.eth on multiple occasions but has not received a response. Cointelegraph contacted the SEC for general comment but did not receive an immediate response.
Ben.eth’s most recent token launch, LOYAL, is supposedly for an in-development decentralized exchange (DEX) and “memecoin launchpad” named PsyDex that will be a competitor to Uniswap, according to collaborator Ben Armstrong.
Last minute tweaks to the $LOYAL contract, so that it can be used to properly incentivize liquidity on Psydex. Shouldn’t be too long. Thank you for your patience.
— ben.eth (@eth_ben) May 31, 2023
Meanwhile, other influencers have attempted to capture some of the recent memecoin magic, asking followers to send ETH for essentially “nothing.”
Send ETH here:
— PAULY (@Pauly0x) May 30, 2023
The wallet address “yougetnothing.eth” currently shows a balance of 411 ETH worth $780,000 and has close to 4,000 transactions over the last 13 hours, according to Etherscan.
Other influencers, such as American socialite Kim Kardashian, have been slapped by the SEC for crypto promotions. In October, the regulator fined Kardashian $1.26 million for her involvement in the promotion of EthereumMax (EMAX). In February, NBA player Paul Pierce made a similar-sized settlement with the regulator.
Additional reporting by Jesse Coghlan.