At this point, it has been firmly established that Crypto Capital AG is Crypto Capital Co/AG/SA/Inc/OÜ.
It has also been established that Crypto Capital AG is Trilliant AG.
Finally, the ties between Trilliant AG and Gladius Network have been established, with depth. As noted in the prior section, three of the core members of Gladius’ team are Trilliant AG transplants — a fact that strongly implies that there presence on the team is no mere coincidence.
Later in the report, additional information will be analyzed that provides even more reason to believe that Gladius Network was essentially operated (and perhaps still is), by Crypto Capital Co / Global Trade Solutions.
However, for now, this report will take a look at the SEC’s actions in relation to Gladius Network.
One of the focal points of this report will be analyzing how the SEC, in spite of all of the obvious red flags and warning signs surrounding Gladius Network, came to the conclusion that no financial penalty should be administered to Gladius. Even further, the SEC also left the door open for Gladius Network to actually register their token as a security.
In Trilliant AG’s whitepaper, they explicitly state that they were partnered with Gladius Network :
This information was included in Trilliant’s whitepaper months before the SEC posted its press release in February 2019. Which means there was ample opportunity to assess this information and conduct a deeper investigation, which would have made the identities of those responsible for Gladius Network more than apparent for the SEC.
Its reasonable to suggest that it would have taken minimal research, at best, to stumble upon Trilliant AG.
Below are the first page results of a very rudimentary Google search query that shows dozens of sources attaching individuals from Gladius directly to Trilliant:
It is also worth reiterating that the Trilliant whitepaper explicitly stated that they were owned/founded/started by Crypto Capital AG:
Thus, even if the SEC were only looking into Trilliant AG merely as a lead without dedicating any substantial resource to investigating the firm, a cursory glance at the whitepaper should have made the connection to Crypto Capital readily apparent.
One could argue that the SEC did come across Trilliant AG, but they simply were unaware of their connection to Crypto Capital AG (despite the wealth of public reports about the company leading up to the February 2019 press release).
However, even if this were the case, there are still a significant number of red flags surrounding Trilliant AG that independently warrant further investigation.
Trilliant AG is not on record as having a license of any sort that would allow them to deploy cryptocurrency ATMs around the planet. In fact, at face value, Trilliant AG’s offering strongly reflects a shady, money laundering operation.
None of the individuals listed as part of the team have any prior experience that would lead one to believe that they could actually run an operation such as the one that they were proposing their whitepaper.
The details about the project itself were vague, at best.
By the time Trilliant started marketing this ICO, the parent company for Trilliant had already changed names, addresses and company directors…twice.
Serious logistics regarding the actual deployment of the ATMs themselves were not covered at all.
There was no method or proposal for how investors were supposed to keep track of how much money each individual ATM was supposed to earn in order to ensure that they were receiving their fair share of dividends from their ‘fractional ownership’ of said ATM(s).
There was absolutely no math behind the financial projections made in the whitepaper.
What is remarkable about these oversights by the SEC is that they state in their February press release that Gladius Network actually assisted them in the investigation.
Specifically, the press release states:
“Gladius self-reported to the SEC’s Enforcement staff in the summer of 2018, expressed an interest in taking prompt remedial steps, and cooperated with the investigation.”
And also that:
“The SEC did not impose a penalty because the company self-reported the conduct, agreed to compensate investors, and will register the tokens as a class of securities.”
What makes SEC’s behavior even more odd is the fact that they explicitly state in the press release that they had levied fines on two prior ICOs that “agreed to pay penalties for similar registration violations and agreed to similar undertakings.”
The information above prompts a few questions, at least. Specifically, two important ones that come to mind are:
How did the SEC miss the glaringly obvious connections to the industry’s biggest fraud?
What made Gladius Network an exception to the fines that they levied on other crypto companies that did the exact same thing as Gladius Network?
The obvious answer to the latter question appears to be that Gladius Network decided to voluntarily divulge their egregious violation of United States securities law. At least this is what the SEC appears to be implying in their press release.
However, documentation of the actual administrative proceeding suggests that Gladius Network may not have simply divulged information because they were a noble organization that spontaneously saw the error of their ways before reaching out to the SEC to voluntarily offer a $15 million refund to all of their customers.
Below, is an embedded copy (.pdf embed) of the SEC’s administrative proceeding for Gladius Network [Release №10608]:
The document, titled, ‘Order Instituting Cease-And-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease and Desist Order’ , paints a slightly different picture of Gladius Network’s actions than the SEC press release.
Specifically, on the first page, under section II, the document states:
“In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (“Offer”) that the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commisssion, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are Pursuant to Section 8A of the Securities of 1933, Making Findings, And Imposing a Cease-And-Desist Order (“Order”), as set below.”
The language above is a bit dense, but here are the important takeaways:
Disclaimer: This report is not being written by an attorney, so this interpretation could be inaccurate to some extent in certain parts. Any open source corrections from attorneys (preferably those with experience in U.S. securities law) are welcome if discrepancies are found in the annotated interpretation below.
The Respondent (Gladius Network), did not actually come out the woodwork to self-report a breach of U.S. securities law. On the contrary, the document states that Gladius Network essentially asked for leniency in anticipation of impending enforcement action and the SEC essentially decided to grant their request.
The phrase, “Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Comission is a party…,” seems to imply that the judgment/enforcement action outlined in this document would be considered sufficient recompense for any and all issues or grievances that the SEC had, has or may have with Gladius Network concerning their illegal securities offering.
Gladius Network did not have to admit any wrongdoing. The only things that Gladius Network was forced to agree with are the “Commission’s jurisdiction over [Gladius Network’s securities offering] and the subject matter of [the] proceedings.”
The SEC’s findings are underneath the heading titled, ‘Summary’, which starts on the first page.
The Summary begins by affirming that Gladius is a ‘Nevada limited liability corporation’ (LLC) and that Gladius was created in 2017.
Apparently, the primary purpose of Gladius Network was to develop a blockchain network outfitted for cybersecurity.
Specifically, the SEC notes that, “Gladius raised approximately $12.7 million worth of Ether during its ICO, based on the exchange rate to USD of Ether at the time of the offering. Gladius did not register the offering pursuant to the federal securities laws, nor did it qualify for an exemption to the registration requirements.”
Perhaps what is most troubling is that, in spite of the glaring oversights outlined throughout this report thus far, the SEC asserts in the administrative proceeding that they took the necessary steps to investigate Gladius Network.
Below is a brief recap of the relevant research steps and findings the SEC claims they took during their investigation of Gladius Network:
The SEC states they positively identified numerous web pages that Gladius Network used to promote their token offering.
The SEC specifically states that they saw details about the offering on, “the Gladius Web Pages, including the details of the token sale, the offering process, the role the GLA Token would play in the Gladius Network, and how Gladius would use the proceeds of the token sale to develop its network.”
The SEC notes that it looked through Gladius’ whitepaper.
The SEC was acutely aware of the various actions of Gladius’ marketing team. Specifically, the SEC states that, “Another Gladius management member posted on social media that ‘as our platform grows and more websites buy our services, the value of the coin increases.’”
The SEC also states, “On Gladius Web Pages, Gladius principals and agents stated that ‘[w]e’ve been approached by some of the largest exchanges, they’re very interested’”.
Despite this alleged investigation into the inner workings of Gladius Network, the SEC still failed to recognize that the primary individuals responsible for the promotion of Gladius Network were all core members of the Crypto Capital AG project, Trilliant — most notably, Ori Levi, a member of Trilliant AG, held the title of Head of Marketing during his tenure with Gladius Network.
Perhaps the most glaring oversight by the SEC, which has yet to be covered in this report, is the involvement of Gery Shalon.
Gery Shalon is an Israeli citizen and career criminal whose involvement in money laundering, fraud, and financial crime, specifically in relation to binary and forex scams, is extensive.
It is estimated that Gery Shalon has successfully defrauded investors around planet earth out of hundreds of millions of dollars (this is not a hyperbolic statement and the claim stems the DOJ).
In 2014, over 80 million financial records were extracted from JP Morgan in a theft that was dubbed to be the largest of its kind in U.S. history.
Shortly after this hack, there was a major coordinated international effort to find those responsible.
The result of these efforts led to the apprehension of three individuals named:
Joshua Samuel Aaron
The press release by the U.S. Southern District of New York detailing the arrest of Gery Shalon and other for their role in the hack of JP Morgan and other major U.S. financial institutions can be found below:
Manhattan U.S. Attorney Announces Arrest Of Defendant Charged With Participation In Massive Hacks… _Preet Bharara, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant…_www.justice.gov
The announcement, which was published on the U.S. Department of Justice’s website on December 14th, 2016, goes into significant detail about Gery Shalon’s role in these hacks.
Gery Shalon was actually arrested in Israel and extradited to the United States to face 22 counts of money laundering/computer hacking/securities fraud in federal court.
Below are the charges as published by the New York SDNY:
In total, it appears Gery Shalon and the two named co-conspirators were facing a maximum of 237 years in prison.
The following federal agencies were involved in the apprehension of Gery Shalon and his co-defendants:
Federal Bureau of Investigation (FBI)
United States Secret Service
Office of the State Attorney of the Israel Ministry of Justice’s Department of INternational Affairs
Israel National Police
Israel’s National Police Cyber Unit
Securities and Exchange Commission (SEC)
Immigration and Customs Enforcement (ICE)
Financial Industry Regulatory Authority (FinRA)
National Credit Union Administration
Department of Justice (Office of International Affairs)
Below is a screenshot from the unsealed federal indictment by the U.S. Southern District of New York (SDNY):
The indictment is linked below in an embedded pdf as well for those looking to read more about Gery’s prolific criminality in addition to his role in one of the biggest financial heists to ever impact a U.S. financial institution :
Some relevant background information regarding Gery Shalon can be found below:
Gery Shalon and his associates (plus some unnamed ones) primarily benefited through stock fraud and manipulation.
Specifically, Gery Shalon’s expertise was in marketing and pushing a narrative on to the market (which was usually false) in order to artificially raise the price of a target investment, if only temporarily.
Gery would combine the method outlined in #2 with actual price manipulation via buy and sell orders on the market, which were effective in moving the price.
Often times, Gery would craft a narrative that complemented his price manipulation efforts. For instance, while he was manipulating the price of a target stock/asset on the market, he would also push a narrative to millions of investors that would point to the asset’s recent price bump (which he manipulated) as evidence of true, increased organic demand.
While the method of market manipulation outlined above may seem relatively simple on its face, Gery Shalon and his co-conspirators in the indictment executed this scheme in a sophisticated manner that essentially guaranteed that they would perpetually profit from their efforts.
Specifically, the indictment states that Gery and his affiliates made millions of dollars from this scheme on a regular basis…
Keep in mind that all of the above information just covers Gery Shalon’s background.
The actual issue at hand for Gery Shalon in this indictment is his role in the largest targeted attack on a financial institution in U.S. history.
Detailed information about the steps taken by law enforcement authorities to track down Gery Shalon and his co-conspirators’ involvement in these attacks is still under seal in federal court.
On page 11, under the heading ‘Overt Acts’, the SDNY asserts that Gery Shalon created a shell company in Arizona under a fake alias which was created with a forged passport:
On page 20, the SDNY outlines identity theft — stating that Gery Shalon and one of his co-conspirators extracted and used a stolen Social Security Number:
Shalon was also accused of laundering millions of dollars in and out of the United States:
Perhaps what is even more remarkable than Gery Shalon’s extensive and significant criminal background, specifically as it pertains to financial fraud, is the fact that the SEC was one of the agencies to initiate formal action against Gery Shalon.
The lawsuit that the SEC filed against Gery Shalon and the two co-conspirators named in the SDNY federal indictment is linked below:
The SEC’s lawsuit is substantially more descriptive about the crimes it asserts Gery Shalon and his co-conspirators had committed.
Notably, the lawsuit also states:
“Defendants Aaron and Shalon violated — and unless permanently enjoyed, will continue to violate — Section 17(a) of the…”
Thus, in the statement above, the SEC actively states that they do not believe that there is any means of ensuring that Gery Shalon will not continue to commit financial crime unless he is permanently barred / disabled from doing so.
The SEC reinforces this belief by seeking relief from the defendants that includes a permanent ban from engaging with U.S. citizens as it pertains to securities law:
In the lawsuit, the SEC laid out numerous findings and conclusions derived from their investigation into Gery Shalon and his co-conspirators.
However, rather than simply listing these out, this report will take the time to outline how similar the Shalon’s activities are to the behavior that can be observed in the cryptocurrency space now
In the portion of the indictment that details the findings by the SEC, they start by asserting that:
The parallels between the scheme outlined above and observable behaviors in the cryptocurrency space are numerous.
However, there are a few elements of the pump-and-dump scheme that the SEC outlined that strongly mirror what is occurring at present in the crypto space.
“Defendants controlled at least twenty stock promotion sites” (Element #1)
“Defendants sent multiple emails touting the same issuer, purporting to come from different, seemingly unrelated sources” (Element #2)
“Prior to these promotions…Defendants…generally obtained stock in the issuers that they were promoting” (Element #3)
“At the same time that they were encouraging the email recipients to buy the promoted stocks, the Defendants or their associates sold their shares into the buying activity that they generated.” (Element #4)
“Disclaimers did not reveal the promoters’ stock ownership or their intention to immediately sell their shares and profit from the increase in price and demand that their touts generated.” (Element #5)
(H3) Parallels Can Be Seen in Trilliant’s ICO Promotion Campaign:
Despite the glaring errors in Trilliant’s value offering (listed in the first section of this report), there was a near-unanimous consensus among all ICO review websites that Trilliant was a great offering by competent and legitimate people.
In fact, its difficult to find a review of Trilliant that contains any criticism.
Below is an annotated screenshot of Google search results for the term, ‘Trilliant ICO review’:
As detailed by the annotations in the picture above, almost every website begins ‘ico’ and has some variant that alludes to a list or ranking system of some sort — most likely to take advantage of Google SEO that more than likely provided these sites as results to unwitting investors using search queries like ‘What are the best ICOs?’ or ‘Rank the best ICOs’.
Below is an excerpt from the website ‘icotokennews’, which was listed among the search results for our query, ‘Trilliant ICO review’:
As noted in the first element of the pump-and-dump schemes perpetuated by Gery Shalon et. al in the SEC lawsuit, the defendants were able to inundate consumers with a multitude of reports and e-mails from entities that appeared to be separate from one another, but were, in fact, related.
A similar phenomenon can be seen via analysis of the Trilliant ICO promotional content.
As a disclaimer, the author(s) of this report cannot definitively prove that these sites are owned by the same entity, it is clear that there is at least one central, unifying force pushing identical content across a multitude of ‘ICO review’ sites that users more than likely thought were unrelated to one another.
This discovery was made by copying a statement from the ‘icoranker’ Trilliant review, then pasting it into Google with quotes — which instructs Google to spit out results with the exact phrasing contained within the quotes.
Below is the quote:
The quote extracted was the highlighted phrase, “your own Fractional Ownership Units let you participate in our lucrative crypto hardware, while we do all the work.”
Below are the results Google gives when asked to search for other sites containing this exact quote (_note that the “_intext:” operator is not needed with quotes):
As shown in the screenshots above, there are dozens of ICO review sites that all contain the exact same information about Trilliant.
Another criticism of the SEC that could be leveled in the larger context of Gladius Network is that the SEC has also done almost nothing to mitigate the rigid control of all information about the blockchain space.
While it is possible that the author(s) of this report simply overlooked possible candidates, the author(s) were unable to find one website or source that provided a legitimate, non-bias review of Trilliant that critically analyzed the project’s offering or its merits.
This claim by the SEC is extremely straightforward and it also mirrors the activities that Gery Shalon and others are still engaged in, as subsequent reports in this series will uncover.
The parallels between the behaviors described in the screenshot above and observable occurrences in the digital currency space should be obvious to any reader that is familiar with the space itself.
The greatest parallel between the digital currency space and the outlined behaviors of Gery Shalon et. al by the SEC can be found in the portion of the excerpt that states:
“On May 20, 2011, the closing share price reached $0.33, an increase of over 1,800% over to the average closing price of $0.017 during the trading days immediately preceding the promotion, and, on May 23, 2011, the trading volume exceeding 30 million shares, compared to the average daily trading volume of approximately 1.2 million shares for the three months immediately preceding the promotion.”
There are numerous additional schemes perpetrated by Gery Shalon that the lawsuit outlines that will not be covered in this report because these schemes, by themselves, could produce another volume of reports.
To clarify, the extensive presentation on Gery Shalon’s background was provided because:
He is explicitly attached to Gladius Network and this is corroborated via public reporting (court documents), which will be analyzed in the following section.
The fact that there is public information attaching Gery Shalon to Gladius Network months before the SEC published their press release stating that they would assess no penalties on Gladius Network makes the decision even more ludicrous in context.
This report spent a substantial amount of time outlining the SEC’s dissection of Gery Shalon’s crimes in their lawsuit against him in 2015 to make the greater point that the SEC is extremely well aware of the activities, connections, tendencies and behaviors of Gery Shalon. Armed with this information, its hard to assess the SEC’s treatment of Gladius Network with extreme skepticism.
Disclaimer: The purpose of this report is not to put forth conspiracy theory, but rather probe and ask questions as a concerned citizen and eligible investor that is targeted by nefarious entities such as Gery Shalon, whose reputation makes him arguably one of the most effective financial criminals of the 21st century, in league with the likes of Bernie Madoff.
The information provided above should make it clear that any individual or entity working with or in affiliation with Gery Shalon deserves significant scrutiny.
Gery Shalon plays a bigger role in the grand scheme of cryptocurrency fraud. This will be detailed in subsequent reports.
Astute readers may be asking the question of, ‘How is Gery Shalon still perpetrating fraud?’ because this report outlined that Gery Shalon was:
Facing over a dozen charges in federal court in 2016 for playing an integral role in the largest attack on a financial institution in U.S. history.
Facing several more federal charts for his role in numerous frauds, scams and thefts of tens of millions of dollars from investors
Facing additional federal charges for stock/market manipulation tactics
Facing federal charges for money laundering
Facing federal federal charges for using fraudulent identities, passports and perpetrating identity theft by stealing sensitive personal information like Social Security numbers from unwitting victims.
Thus, it stands to reason that the Gery Shalon saga should have been over years ago when he was apprehended in 2016, right?
Several news reports state that Gery Shalon is a free man at the time of publication (July 2019) and even speculate that Gery Shalon has been free for quite some time.
Apparently, Gery Shalon was able to work out a deal with federal prosecutors, which saw Gery retaining his freedom in exchange for intel on other individuals in his criminal syndicate.
According to Bloomberg, Shalon’s intel regarding Russian hackers, specifically, has essentially allowed him to earn his freedom (see below):
Daily Beast published an article hinting at a possibility for extreme leniency/freedom for Gery Shalon as early as February 2018.
As reported by Daily Beast, it appears that the shuffling of attorneys among parties that are peripherally related to Gery Shalon helped expose the fact that Gery was cooperating with authorities.
Numerous Israeli publications have reported that Gery Shalon was granted freedom, specifically, on the condition of paying $400+ million in restitution as well as providing information to federal authorities about various Russian hackers.
Curiously, digging up information validating these claims actually indicates that Gery Shalon was involved in even more crime than what’s been covered thus far.
Below is an excerpt from the Israel-based publication, ‘HAARETZ’:
At this point, the Gery Shalon story takes a sharp right into the world of cryptocurrency.
Almost all mentions of Gery Shalon being released from incarceration circa 2017 will involve the mention of an individual named ‘Anthony Murgio’.
For those that are unfamiliar, Anthony Murgio was one of the operators of a now-defunct cryptocurrency exchange, called ‘Coin.Mx’.
Anthony Murgio was also named as a co-defendant alongside Gery Shalon in a federal indictment by the U.S. SDNY.
‘Wait a minute, we just reviewed Gery Shalon’s federal indictment in the Southern District of New York and Anthony’s name wasn’t mentioned anywhere’
If that statement written above popped into your head as you were reading, don’t worry, you aren’t going crazy.
Anthony’s name wasn’t in that indictment was covered earlier in this report.
Let’s reference that indictment again to be absolutely sure:
Going back to the December 14th, 2016 press release by the U.S. SDNY, we can see the following:
Thus, Anthony Murgio was always part of the same indictment of Gery Shalon that specifically addressed his role in cyber fraud (among other crimes).
The press release for this announcement can still be found on the Department of Justice website.
What is worth strongly noting are the DOJ’s references to cybercrime. More importantly, the original press release regarding the indictment includes numerous references to Attorney General, Loretta Lynch (Obama-era; previous presidential administration) regarding her comments and disposition on the case.
The fact that Loretta Lynch’s attention was drawn to this case, speaks volumes about the level of priority it was given.
For those that are not familiar with U.S. politics or the governmental structure, there is a massive difference in legislative authority between the Attorney General and an Attorney General.
For instance, Preet Bharara, whom was a U.S. Attorney General for the Southern District of New York, at the time, is restricted to prosecuting cases in the Manhattan Supreme Court. Of course, given New York’s influence and general cultural and financial impact, the authorities granted to the Attorney General of New York are arguably greater than those exercised by Attorney Generals in other states.
The Attorney General of the United States (William Barr, currently) is essentially at the head of the entire Department of Justice for the United States.
To put Loretta Lynch’s role in greater context, here is a screenshot from the archived White House government website during the Obama administration, which she served under:
Quick Trivia: The list above presents cabinet members in order of succession, so if some crazy disaster happened and the President, VP, Secretary of State, Dept. of Treasury, and Dept. of Defense were all unable to serve, the sitting Attorney General would be de facto president.
Now that the importance of Loretta Lynch’s direct involvement in this case has been shelled out, the scale of crime for which Gery Shalon was under the thumb of the United States for should be more understood if it wasn’t already.
Below, is a brief look at a few excerpts from the original press release on the DOJ website announcing the unsealing of Shalon et. al’s indictment(originally posted November 10th, 2015) :
What’s strongly worth noting in the excerpt above is that Gery Shalon is framed as the primary target and perpetrator of the crimes for which is he being accused in the unsealed indictment.
Essentially, Shalon was being prosecuted as the ring leader responsible for orchestrating these crimes.
In fact, the press release goes on to state that,
“ Shalon also orchestrated computer network hacks and cyberattacks in furtherance of other major criminal schemes, including unlawful internet casinos and illicit payment processors which Shalon operated with Orenstein.”
The indictment then mentions Shalon’s involvement with crypto exchange Coin.MX, see below for the full excerpt:
The above excerpt tells us:
Gery Shalon is the mastermind of all of this illegal activity, according to the U.S. government.
While the hacking of financial institutions was a major focal point, so was his operation of illicit gambling and payment processing schemes (this should start sounding familiar to those investigating crime in the crypto space).
Gery Shalon was the owner of Coin.MX. So, this confirms that he pretty heavily involved in the digital currency space.
Anthony Murgio, Coin.MX’s operator, was charged in a separate indictment for some reason, despite being complicit (more than likely to a lesser extent) in the same crimes Gery Shalon was being charged for, with the exception of the hacking of U.S. financial institutions.
This section will contain excerpts from the DOJ that detail the various crimes Gery was accused of committing.
Given all that’s written above, it stands to reason that the affiliation/attachment of an individual like Gery Shalon to Gladius Network should raise numerous red flags.
However, it appears that they have raised none. Furthermore, this exacerbates the SEC’s oversight in this case exponentially.