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The Securities and Exchange Commission (SEC) stopped a cryptocurrency scam perpetrated by a former Washington state senator and two Florida residents who defrauded investors in the United States and overseas.

On Friday, the SEC obtained an asset freeze and other emergency relief to stop former Washington state senator David Schmidt, Nicole Bowdler, and Robert Dunlop, who is doing business as Clear International Trust from defrauding cryptocurrency investors.

The Commission also included Pramana Capital and Peter Shamoun as relief defendants in the lawsuit, which was filed in the Western District of Texas.

Defendants falsely claimed that Meta 1 Coin will never lose value

In the complaint, the SEC alleged that Mr. Schmidt, Mr. Dunlop, and Ms. Bowdler encouraged investors to invest in a purported cryptocurrency called “Meta 1 Coin Trust through an unregistered initial coin offering (ICO).

The defendants allegedly made numerous false and misleading statements about Meta 1 Coin. They claimed that the cryptocurrency was backed by a $1 billion art collection or $2 billion of gold, and an accounting firm was auditing the gold assets.

Additionally, the defendants told investors that Meta 1 Coin will never lose value and could return up to 224, 923%.

The defendants raised at least $4.38 million from more than 150 investors in the U.S. and overseas since April 2018. They never distributed the Meta 1 Coins to investors. Instead, they used investor funds to pay for personal expensed and funnel proceeds to Pramana Capital and Mr. Shamoun.

According to the SEC, the defendants directly and indirectly engaged in business activities, practices, and transactions that violated the anti-fraud and securities registration provisions of the Securities Act and the Exchange Act.

In a statement, SEC Fort Worth Regional Office Director David Peavler said,    “As we allege, the defendants made audacious claims about the Meta 1 Coin and would say almost anything to separate investors from their money. Investors should always look skeptically at promoters who claim that their investment cannot lose value or that investors will receive massive returns.”

The Commission is seeking permanent injunctions, disgorgement of allegedly ill-gotten gains with prejudgment interest, and civil penalties against the defendants.