The result of Mr. Tenreiro’s actions, as described above, within the Victim Impact Statement, constitute multiple breaches of the New York Rules of Professional Conduct, and his conduct has directly caused harm to many, including but not restricted to the holders of VERI tokens, for which I am one. These breaches not only significantly misled the court in a successful attempt to attain a favorable ruling for the commission, but also interfered with Veritaseum’s ability to operate, leading to significant financial and reputational damage for individuals and entities who hold VERI in well over 20,000 individual addresses (places where digital assets are kept).

This is easily thousands of people that were negatively affected by these actions. The tokens were not traditional “investments” but represented a unique software utility within Veritaseum’s ecosystem, and many token holders relied on these tokens for accessing Veritaseum’s unique offerings.

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In the summer of 2017, the SEC commenced an investigation of the Defendants, predicated on the erroneous assumption that Veritaseum’s sale of utility tokens was an unregistered offering of “digital asset securities,” a fabricated term, in and of itself, with no statutory basis or foundation. The investigation lasted until August 12, 2019, when the SEC filed an action seeking an “emergency” TRO, temporarily freezing all of Mr. Middleton’s personal as well as Veritaseum’s assets.

The SEC’s purported emergency was based on Mr. Middleton’s transfer of digital assets that the SEC alleged were a “dissipation” of company assets caused by Mr. Middleton’s receipt of a Wells notice indicating that the agency would likely sue him. Ten days earlier, however, defense counsel had demonstrated to the SEC that the asset transfer in question was nothing more than the routine funding of Veritaseum’s ongoing lawful business operations and was consistent with the companies’ prior funding practices. The SEC did not disclose this information^[1] to the Court in its asset freeze application and apparently knowingly (or should have known it) incorrectly represented to the Court that Mr. Middleton had transferred a portion of the assets to a personal account. In fact, all the assets remained in the companies’ control.

The TRO action^[2] was heard by the Honourable LaShann DeArcy Hall, sitting as Miscellaneous Judge, late in the afternoon of August 12, 2019. The Court heard oral argument from both sides but did not give the defense an opportunity to file a written response before temporarily freezing Veritaseum’s assets. Judge Hall denied the SEC’s request to freeze Mr. Middleton’s personal assets.

The temporary freeze in this case caused significant harm to the holders of Veritaseum’s utility tokens, the very people the SEC purportedly sought to protect. The Defendants applied to this Court for lifting the freeze in its entirety.

Until Veritaseum’s assets were frozen, the company’s operational and functional software platform enabled its utility token holders to purchase blockchain-based ownership interests in gold and other precious metals at a discount. The SEC did not and could not truthfully state that there was anything illegal about this business activity and had not asked the Court to enjoin it. Instead, to the direct detriment of token holders, the SEC sought to destroy the business by freezing its assets and blocking its customers from exercising their contractual rights to redeem their holdings.

This constitutes an abuse of process under New York Penal Law § 195.00 (Official Misconduct), by using the legal process for an ulterior or improper purpose. The SEC’s actions, if proven, may constitute abuse of process and could have misled the court, resulting in harm to the Defendants and their customers. The temporary freeze had already disrupted the business enterprises and damaged the company’s token holders and severely damaged the reputation of Mr. Middleton by immediately publishing their Complaint and press release^[3], destroying agreements, including a joint venture agreement with the Nigerian Stock Exchange and a Memorandum of Understanding with the Jamaican Stock Exchange, amongst others.

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In a letter dated February 7th, 2024^[4], concerning enforcement proceedings against Digital Licensing Inc., also known as the “Debtbox” case, to SEC Chair Gary Gensler signed by Senators James Vance, Thom Tillis, Bill Hagerty, Katie Boyd Britt, and Cynthia Lummis, and in response to the Judge’s request for an explanation for the materially false and inaccurate allegations contained in that action, the Senators stated that

This case may serve as an example of concerns raised by Senators regarding potential instances of – dubious evidence, obfuscations, or outright misrepresentations” in SEC actions. Jorge Tenreiro, as the senior trial attorney on the case, played a significant role and had substantial involvement in preparing, reviewing, and advising on the content of the complaint filed on August 12, 2019, and must be held responsible for its content, even though it was signed by his superior, Marc P. Berger. His name was listed in the signature block, indicating that he was actively involved in the formulation of the arguments and factual assertions in said document. The SEC operates as a collaborative entity, and attorneys contributing to filings bear responsibility for ensuring the accuracy and integrity of the claims made. Further, Tenreiro did sign the SEC’s Memorandum of law in support of its emergency application for a temporary restraining order freezing assets and also the SEC’s subsequent memorandum of law in further support of its application for a preliminary injunction freezing assets.

It is clearly shown below that the complaint, memoranda of law and supporting declarations by himself and the SEC’s expert witnesses contained abjectly false and glaringly misleading statements, and that Tenreiro knew or should have known that those statements were inaccurate, misleading or false. As an officer of the court, he owes ethical duties to both the court and opposing parties to present truthful, accurate information.

Additionally, where Tenreiro did not directly make false statements, failure to correct known falsehoods or misstatements in subsequent filings, once they came to light, is itself an ethical violation, and despite having opportunities to do so, failed to correct such false and misleading statements in subsequent pleadings to the Court, resulting in Fraud Upon the Court.

Under the New York Rules of Professional Conduct, attorneys have a duty to avoid making false statements of material fact or law to the court. Rule 3.3 of the New York Rules of Professional Conduct states that a lawyer must not knowingly make a false statement of fact to a tribunal or fail to correct one once discovered.

Under Rule 3.3(a)(1) of the New York Rules of Professional Conduct, an attorney has a continuing duty to correct any false statements previously made to the court. This duty extends not only to statements made in oral arguments but also to written filings, including complaints, declarations, and memoranda of law. Failure to correct such misrepresentations, especially when they become evident later in the case, is considered a serious violation.

Finally, Tenreiro states in his declaration that

Document Reference: Case 1:19-cv-04625-WFK-RER Document 2 Filed 08/12/19 Page 4 para 6. So that he placed reliance upon the content of these declarations and was equally under a duty to ensure their accuracy and veracity.

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There were no products “ready to ship” cf para 2 & 6 of the Complaint and "Defendants have not developed any functional platform as promised to investors."

Document Reference: Case No. 1:19-cv-04625, ECF No. 2-1, p. 12 (Filed Aug. 12, 2019), SEC's Memorandum of Law in Support of Emergency Application.

By first quarter of 2018, VeADIR was operational and in beta testing by outside users. See Declarations of Patryk Dworznik and Mark Sheahan.

Document references: Case 1:19-cv-04625-WFK-RER Document 27 Filed 08/19/19 & Case 1:19-cv-04625-WFK-RER Document 32 Filed 08/19/19, respectively.

On or about March 9, 2018, Mr. Middleton and his staff gave a live demonstration of the VeADIR system to SEC staff members at their offices in New York and virtually from Washington, DC. On March 13, 2018, four days after praising Mr. Middleton on the functionality of the system, the SEC instructed him to shut it down (cancel the [smart] contracts and restrict new registrants), however, how can one shut down that which is alleged not to exist?

Note the following communication relayed by Middleton’s counsel, Covington Burling, following a telephone call between Valerie Szczepanik and Jorge Tenreiro for the SEC, and David Kornblau for the Defendants:

Deposition of Mr Middleton taken by Jorge Tenreiro on Tuesday, June 5, 2018, at the SEC’s offices, where “A” is Mr Middleton providing the answers and “Q” is Tenreiro providing the questions, page 734.

Document references: Case 1:19-cv-04625-WFK-RER Document 3-36 Filed 08/12/19:

Which appears to leave little doubt that Tenreiro knew the VeADIR platform was operating and functional as he admits in his own words;

and that it was the SEC that instructed Mr. Middleton to shut the platform down

referred to above. Yet Tenreiro further claims

Although there was no VeADIR system operational at the time of filing the emergency TRO, Tenreiro omitted the fact that it was operational and functional prior and that it was the SEC that instructed Mr. Middleton to shut the system down. New products and services, such as VeRent, VeGold, VeSilver, VePalladium were consistently being developed and added to VeADIR, as per the declarations of Patryk Dworznik and Mr. Middleton such that VeAssets software was ready for testing by September 2018.

Indeed, para 9 of the emergency TRO states;

These “new tokens” were part of a range of products and services added to the VeADIR platform for VERI token holders to enjoy, and thereby increase the utility of their tokens, since access to the VeADIR was by use of VERI only.

Further showing that the SEC knew the VeADIR platform was operational and functioning as promised by the Defendants in sales documentation and numerous posts made in various and diverse media. So, to state that “no such product existed” is a complete fabrication. Finally, the content of Patrick Doody’s (expert witness for the SEC) declaration also refers to the existence of these products and services, but clearly there appears to be some lack of understanding on the part of the SEC as to how these products worked.

Relevant Rules Violated:

Rule 3.3(a)(1): Making false statements of fact.

Rule 4.1: Truthfulness in statements to others.

Rule 8.4(c): Engaging in misrepresentation.

2. Manipulative Trading Activity

To establish a claim of market manipulation under Section 9(a)(2) of the Exchange Act, the SEC must show that Mr. Middleton engaged in

15 U.S.C. § 78i(a)(2). This statute is not intended

SEC v. Malenfant, 784 F. Supp. 141, 144 (S.D.N.Y. 1992) (quoting Trane Co. v. O'Connor Securities, 561 F. Supp. 301, 304 (S.D.N.Y.1983)).

The SEC’s emergency TRO application relies heavily upon two expert witnesses, one of whom is Patrick Doody, a Blockchain Data Scientist, whose

It was alleged that Mr. Middleton secretively placed trades to manipulate the market price of the VERI token, however, the SEC apparently purposely failed to inform the Court, through omission, that public announcements had been made about placing trades on the new Etherdelta exchange to test their platform.
See exhibit 15 and exhibit 16 in Mr Middleton’s declaration (document reference: Case 1:19-cv-04625-WFK-RER Document 33 Filed 08/19/19), in particular;

made on: May 31, 2017, 03:32:47 PM, in Bitcoin Forum. Etherdelta was the first-ever “decentralized exchange.” See id.; https://en.m.wikipedia.org/wiki/Decentralized_exchange. Note that this exculpatory evidence was omitted from the SEC’s submission to the Court. The test trades were to examine both the performance of the new platform and liquidity of the VERI token on said platform. There were email and other communication records between Mr. Middleton and stakeholders, demonstrating transparency and operational intents, which Tenreiro had had sight of.

The SEC falsely alleged that Mr. Middleton engaged in manipulative trading of VERI tokens on June 4, 2017, claiming his trades were secretive and aimed at inflating VERI’s price. Mr. Middleton had not only publicly announced his intention to conduct test trades on EtherDelta, countering the claim of secrecy, but that the results would not reflect broader market demand. His trades included both buy and sell orders, causing prices to decrease as well as increase, which was inconsistent with manipulation.

There was no data from the SEC to confirm sustained price inflation post-Middleton’s trades, weakening the SEC’s stance even more, facts Tenreiro conveniently omitted.

Doody’s Declaration August 12th, 2019:

Para 17 & 18 refers to trades on 31st May 2017 and on 4th June 2017. Indeed, Doody specifically states that the trades on 31st May

These were all sales of the VERI token. Four days later further trades were made and para 18 states

However, the chart below that paragraph does not show the 69.6 ETH going back anywhere. Not only was this misleading, it was never corrected in subsequent declarations.

Para 19 describes how a total of 52 purchase trades of VERI were made, 42

testing different types of trade.

Doody goes on to state that Middleton “spent...337 ETH to purchase a total of….4,769 VERI.” Just 4769 VERI tokens representing 0.004769% of the total supply of 100,000,000 VERI tokens. Considering Bullion Banks trade silver contracts for between 50-100% of annual worldwide silver mine production daily, that’s not considered market manipulation by the CFTC, then how can the SEC sincerely argue that trades amounting to just 0.004769% of the total VERI supply constitutes market manipulation? This disproportionately low volume of total token supply was never revealed to the court, and the representations made were designed to mislead the court.

Para 20 states “Over 82.6% of the total VERI trade volume that day was purchased by fb90.” This was a disingenuous statement designed to mislead the court, in that Mr. Middleton was essentially the first user of the platform to test its capabilities, so obviously his trades would represent a disproportionate amount of the total trading activity in the VERI token, as hardly anyone else was using the Etherdelta platform, another fact Tenreiro omitted to mention, giving the court a false and misleading impression.

Para 22 states “trades on June 4, 2017, coincided with a 315% increase in the price of VERI.” This is disingenuous since there was little to no liquidity on the exchange, and at the outset of any trading activity in any product launch, even the smallest trade would likely affect the price disproportionately. However, in contrast, the complaint alleged “the price of VERI on EtherDelta had increased 315% as a result of the trading by fB90” cf para 104 page 22. Mr. Middleton’s wallet acted as a market maker in 42 instances and then it accepted 10 orders from other wallets. The prices in those trades showed an increasing trend and there's a few addresses that accepted Mr. Middleton’s orders multiple times (e.g.: 0xd34c69b15647ecb611cba05cff81ea1e55c5e79d). Doody’s interpretation is that those 52 trades had the effect of multiplying the price of VERI by 315%. But he's using the word "coincided". That it's just posting some trades at prices 0.0667 and 0.0833 and a few more repeatedly. It’s likely that’s what Etherdelta User Interface suggested based on the top position in the order book. Then some trades are taken at the price of 0.01 ETH, likely posted by someone just playing with Etherdelta and using a round number. Doody got the information from the blockchain, but it may mean different things, and no one can know the intentions behind those trades.

It is clear Mr. Middleton was just testing Etherdelta as a first-time user. So, moving approximately three hundred ETH on that day as a test is very plausible, yet the allegation made by the SEC was manipulative trading activity. Mr. Middleton’s actions may have driven the price up regardless of his intentions. Tenreiro failed to provide accuracy and clarity to the court regarding these matters.

Doody’s Supplemental Declaration dated August 22, 2019:

Para 7 displays charts that do not show the months of May/June 2017. The date of June 2017 should have been shown on the charts, which would have more clearly shown the court that the dates of trading activity in question were at the outset of Etherdelta’s trading activities in VERI.

Furthermore, the charts show cumulative volumes and transactions traded over a 19-month period, as opposed to average daily volumes, giving the misleading impression that trading activity was huge, it was not. The average daily transactions were approximately $3,414.52 and the average daily volume was approximately 332.45, giving an average daily per transaction value of just $10.27, extremely low.

The figures were deliberately represented in such a way as to mislead the Court into perceiving a totally different narrative. It would have been easy to move the price due to lack of volume and liquidity, even if that was not the intention. Facts that Tenreiro conveniently omitted to make clear to the court.

No further trades were made by Mr. Middleton other than those two isolated dates, and for the purposes of testing the platform, totally discrediting the SEC’s arguments for intentional market manipulation.

Para 9 exhibit 25 lists other VERI trading platforms, which Mr. Middleton could also have used for “manipulative trading”, but none were made, as none existed. Furthermore, the complaint alleged

at para 107, page 22. A complete falsehood as Mr. Middleton did NOT own any VERI tokens at all, as these were held by Veritaseum LLC.

The SEC did not establish that Mr. Middleton’s test trades were undertaken with secretive manipulative intent. In the process of testing the site, Mr. Middleton’s true intent is revealed by his successful effort to help EtherDelta prevent market manipulation. He detected a flaw in EtherDelta’s trading platform that he believed created an opportunity for others to manipulate it. He devised a solution for the problem and directed a Veritaseum colleague to bring it to the attention of EtherDelta’s founder, who immediately implemented it.

Note that this exculpatory evidence, too, was omitted from the SEC’s allegations to the Court. These actions reflected a sincere desire to help VERI token holders, not an intent to engage in market manipulation.

What is also highlighted here is the SEC’s conflation between transactions versus trades. Their expert, Doody, refers to transactions in his declaration, and so too does the complaint at para 104 page 22, implying more trades were placed by Mr. Middleton than had actually taken place.

The SEC stated

The SEC claims that Mr. Middleton made 42 purchase orders of VERI on June 4th, 2017, when what happened was that 42 transactions were made filling an unknown number of Mr. Middleton’s limit orders, which were made on an unknown date. Etherdelta did not record the creation of limit orders on the blockchain, so that the claim that Mr. Middleton made 42 trades on June 4th, 2017 is based on data from the blockchain is problematic.

This failure to provide accuracy and clarity as to the correct meaning and differentiation between transactions versus trades reflects a lack of due diligence at best, but either way, gives the court a misleading impression as to the truth of what actually took place. Based on the prices that the trades were made, it is very likely that Mr. Middleton only placed around 11 limit orders. This is because many trades were executed at almost the exact same price and the slight differences in price can be attributed to rounding discrepancies.

What should be noted is several people and/or transactions can fill the same single order. To illustrate the point further, Mr. Middleton would have placed a trade to sell say 100 VERI tokens on the Etherdelta exchange, which matches buyers and sellers, so that five different buyers may have bought 20 VERI tokens each, which the SEC interpreted as five separate transactions, but in truth was just one trade placed by Mr. Middleton.

To quote the Honorable Senators listed in their letter of February 7, 2024, to The Honorable Gary Gensler; Chairman of the SEC,

At the very least there appears to have been negligence in carrying out their duty and that severe negligence by a public official can sometimes be charged as a misdemeanor under certain state laws, particularly if it leads to significant harm or breaches public trust. The alleged negligence in verifying key facts about the case, such as the actual functionality of the platform, and the SEC's failure to properly investigate and verify trading activity could potentially be seen as gross negligence.

All this information was made available to the SEC during their two-year investigation, however, their expert, Mr. Doody, made erroneous statements of facts and made assumptions that should not have been made, misrepresenting information that misled the Court into believing that what they were witnessing was major manipulative trading activity. In fact, a closer examination reveals that to be totally false. These inaccurate and misleading allegations along with others made, were relied upon by the Court in granting an emergency TRO application, which directly led to the destruction of the Veritaseum enterprises.

Finally, and perhaps most importantly, Patrick Doody, as an expert witness, was expected to provide impartial and unbiased testimony, failed to disclose in either of his declarations that;

cf. Para 2 in the exhibit to his declaration dated January 23, 2020 in SEC v Telegram Group Inc., & TON ISSUER Inc. Case 1:19-cv-09439.

Patrick Doody, through Lily Pad Capital LLC, has a financial stake in digital assets and technologies that might infringe upon the patents pending at the time of his testimony in the SEC vs. Middleton case. The patents in question, which the SEC argued would not be granted, were later granted, and Middleton used them to pursue legal actions against large entities like Coinbase and Circle. This raises a clear and palpable conflict of interest if Doody’s fund invested in technologies, as is likely, related to those patents.

The SEC claimed that Middleton’s patents were "lacking in novelty" and that he was fraudulently marketing them. The subsequent granting of these patents and their use in litigation shows that these claims were incorrect. Both the SEC and Doody failed to disclose Doody’s financial interests in technologies that might be impacted by Middleton’s patents, raising concerns about impartiality and fairness. The TRO and subsequent consent decree severely harmed Middleton’s business, patent prosecution, and litigation efforts, potentially benefiting Doody’s financial interests by preventing competition and avoiding royalty fees.

These crucial facts should have been disclosed to the Court by either Tenreiro and certainly by Doody himself and indicates a clear potential conflict of interests. Doody’s financial interest in digital assets leads to questions about his impartiality and independence as an expert witness, which also impacts upon the credibility of his testimony, as he had financial stakes in the very sector he was providing expert testimony on; a case involving digital assets. This failure to disclose would be grounds to challenge the admissibility of his evidence or at least diminish its weight.

Under legal and ethical standards, expert witnesses are required to disclose any potential conflicts of interest that could influence their testimony. Since Doody did not disclose his involvement with Lily Pad Capital LLC in the SEC vs. Middleton et al case, it could be argued as a violation of these standards. Federal Rules of Civil Procedure (FRCP) 26: Rule 26(a)(2)(B): Requires that expert witnesses disclose all facts, data, and information that could be relevant to their testimony, including any potential conflicts of interest.

A failure to disclose his role at Lily Pad Capital LLC should have led to a motion to strike his testimony, once this information became known, which could also include challenging Doody’s testimony or seeking to introduce this information in a motion to reconsider. OpenCorporates confirms the existence of Lily Pad Capital, LLC, registered in Texas, with Patrick Doody listed as the agent. The company has been in existence since at least November 1, 2017, as evidenced by the certificate of formation. The company has been active, with annual filings from 2017 to 2023.

Patrick Doody's role as an agent and now President of Lily Pad Capital, LLC, indicates a direct financial interest in the digital asset space. Since Doody and Tenreiro failed to disclose this financial interest in the SEC vs. Middleton et al case, it results in a breach of both ethical standards for expert witnesses and the requirements under the Federal Rules of Civil Procedure. Doody’s testimony in this case was material to the court's decision, and it is contended that without his testimony, the SEC may have faced difficulties in obtaining a TRO from the Miscellaneous Judge in the first instance.

The SEC’s reliance on Doody’s testimony, without disclosing his potential conflict of interest, could undermine the credibility of their case. If the SEC was aware of the conflict and still chose to rely on his testimony, it could raise questions about the fairness and integrity of their actions. The SEC’s actions, facilitated by Doody’s testimony, led to significant harm to Middleton’s businesses and patent prosecution efforts. This raises concerns about whether the SEC acted in good faith and whether their actions were proportionate and justified.

Under Federal Rules of Evidence; Rule 702, an expert's testimony is admissible only if it is based on sufficient facts or data and is the product of reliable principles and methods. A conflict of interest could undermine the reliability of the testimony.

Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999): This case emphasizes the trial judge's role as a gatekeeper to ensure that expert testimony is relevant and reliable. The failure to disclose a conflict of interest could render testimony unreliable.

Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993): Establishes standards for the admissibility of expert testimony. A failure to disclose conflicts could lead to a challenge under the Daubert standard. Doody’s undisclosed financial interests would have created a significant conflict of interest, undermining the fairness and impartiality of the SEC’s actions, and if Tenreiro and Doody knowingly misrepresented facts or failed to disclose material conflicts of interest, this could be construed as "fraud upon the court," potentially invalidating the TRO and the Final Consent Judgment.

As lead trial attorney, Tenreiro was under an obligation to ensure that none of his expert witnesses were subject to potential conflicts of interest or at the very least, to disclose such potential conflicts, affording opposing counsel the opportunity of challenging the impartiality of said witness.

3. Misappropriation and Dissipation of Assets Allegations

These allegations together with the allegation above regarding manipulative trading activity, were perhaps the two most serious allegations made against the Defendants by the SEC in their emergency TRO application on August 12, 2019. It's alleged that the SEC justified its actions by falsely alleging that

at para 1, page 1 of the complaint.

The SEC, deliberately or otherwise, made materially false and misleading representations that undermined the integrity of the proceedings. In the meantime, the restraining order froze the Defendants’ assets, shut down Veritaseum Inc., and Veritaseum LLC, and caused its VERI token to crash, and much more.

To quote from the aforementioned Senators’ letter to Gary Gensler,

and

The allegations of misappropriation and dissipation essentially revolve around four aspects: ownership of the Kraken cryptocurrency account, payment of director’s remuneration, overseas payments, and a clear misrepresentation concerning the flow of funds in relation to digital metals, such as VeGold.

Ownership of the Kraken Cryptocurrency Account:

Attorney Tenreiro misrepresented the ownership of a Kraken cryptocurrency account in his Evidence: Emergency TRO asset freeze application^[1], claiming it was a personal account belonging to Reginald Middleton, that Mr. Middleton had been personally misusing the proceeds from the VERI token offering. However, the Kraken account was in fact a tier 4 corporate account owned by Veritaseum, LLC. Tenreiro made assertions that these actions warranted the emergency asset freeze, presenting them as direct evidence of financial misconduct. This misrepresentation led the court to freeze Veritaseum’s assets, damaging the company’s operations, preventing the Company and Mr. Middleton from being able to defend itself, and diminishing the value of VERI tokens.

1. SEC Complaint and Emergency Temporary Restraining Order Application:

Document Reference: Case No. 1:19-cv-04625-CBA-RER No. 1 page 4, para 9 (Filed Aug. 12, 2019).

Document Reference: Case No. 1:19-cv-04625-CBA-RER No. 1 page 24, para 116 (Filed Aug. 12, 2019).

Document Reference: Case No. 1:19-cv-04625-CBA-RER No. 1 page 24, para 120 (Filed Aug. 12, 2019).

2. Declaration Of Jorge Tenreiro in Support of the SEC Application for a TRO:

Document Reference: Case No. 1:19-cv-04625, WFK-RER No. 2 page 1/2, para 3 (Filed Aug. 12, 2019).

Document Reference: Case No. 1:19-cv-04625, WFK-RER No. 2 page 5, para 8 (Filed Aug. 12, 2019).

3. The SEC expert witness, Patrick Doody in his 1st Declaration:

Doody states that he gleaned information from;

In Doody’s 1st Declaration^[5], para 33 states

Doody claims that it was Kraken that told him the account was either in Mr. Middleton’s or Eleanor Reid’s, proving that Doody stated there was direct communication between Kraken and the SEC staff, yet the Complaint alleged that this account belonged to Mr. Middleton personally.

Further, Doody’s declaration disingenuously infers that Kraken was not sure to whom the address/account belonged to, which defies belief, as Kraken would definitely have known to whom the address/account belonged, if indeed there was any communication, which we now know was not the case.

Factually, the account belonged to Veritaseum, LLC, and was a corporate account and not a personal account. The SEC led in this action by Jorge Tenreiro, was or should have been aware of this. Notwithstanding the actual ownership of the accounts, even when there appeared to be ambiguity regarding ownership (according to expert witness Patrick Doody’s Declaration), Jorge still attributed ownership to Mr. Middleton.

In reality, no such ambiguity ever existed since the SEC knew of the Kraken account from at least before July 11, 2018, as it was contained in subpoenaed Gmail items^[6] requested by the SEC wherein Jorge Tenreiro is quoted as saying "we knew about Coinbase, Citi, and JP Morgan, but now heard about Gemini, BofA, Kraken, and perhaps others." And so had more than a year to verify ownership of this account. It is inconceivable the SEC did not know to whom the account belonged.

Mr. Tenreiro also knew or ought to have known that this account was a “Tier 4 corporate account” from documents supplied to the SEC^[7] following subpoenas during their investigation.

The attached document contains snapshots of electronic messages^[8] between Mike (Kraken Support), Eleanor Reid, and Reggie Middleton dated February 28, 2018, clearly showing that the account application was to be in the name of Veritaseum LLC, and that the SEC had ALL this information and documentation during its two-year investigation.

4. Doody’s Supplemental Declaration:

Within Doody’s Supplemental Declaration^[9], Para 13 stated

Clearly, Doody and Jorge Tenreiro had seen the contents of the snapshot containing the electronic messages between Kraken Support, Eleanor Reid and Reggie Middleton referred to above, where it obviously shows that this was a Tier 4 corporate account. How else could Doody have known that the additional information requested (IRS EIN letter, where he was clearly and deliberately obfuscating by stating personal social security number) to open a Tier 4 corporate account was needed, disingenuously using that as his excuse for making such an “error” in his earlier declaration that the Kraken account was Mr. Middleton’s, and of Ms. Eleanor Reid’s involvement in assisting with the completion of such application forms.

Furthermore, the “account opening documentation^[12]” plainly shows this form was for a corporate account, that cannot be denied.

Compare Doody’s reasons above with the assertion in paragraph 33 in his earlier declaration, first claiming that it was “Kraken (that) indicated” who the owner(s) were. The SEC and their primary expert witness’s story had changed, indicating an inconsistency, or what appears to be, in layman’s parlance, a lie.

Although this so-called “error” was admitted in Doody’s Supplemental Declaration^[13] dated August 22, 2019, it was done so only after Mr. Middleton’s filing of his comprehensive rebuttal and the voluminous documentary evidence provided in his declaration. Sadly, this was after the devastation caused by the granting of the emergency TRO and the consequent reputational damage caused by the SEC’s immediate press release^[14] of August 13, 2019.

By the SEC/Jorge Tenreiro continually asserting the false ownership of the Kraken accounts after Middleton had put them on notice of its falsity, the fraud prongs of knowledge of falsity or reckless disregard and intent to induce reliance are again satisfied with significant confidence.

5. FOIA Request Showing No Communications with Kraken:

The absence of communication records between Kraken and the SEC strongly indicates that the SEC acted in bad faith. The FOIA document^[15] emphasizes that the lack of documentation makes apparent the SEC did not verify the ownership of the Kraken account before representing to the Court that Middleton was using an account that belonged to him to siphon off “investor” funds, further supporting the case of misrepresentation and misconduct. This lack of verification is significant.

communications between the above-named persons (SEC employees, SEC hired expert witness) and Payward Inc., Payward Ventures Inc., known as Kraken, regarding the SEC v. Middleton et al. investigation

Document Reference: Freedom of Information Act (FOIA), 5 U.S.C. § 552, Request No. 24-04057-FOIA.

Which begs the question, how could Tenreiro and Doody allege the Kraken account belonged to Mr. Middleton personally, claiming communications with Kraken to make these false allegations, when the FOIA response above confirms that there were never any communications between the SEC and their expert witness. This is further evidence of both Tenreiro’s and Doody’s propensity to lie, there is no other interpretation. Unless there were indeed prior communications with Kraken, in which case it would show that the SEC are lying now in their FOIA response. Additionally, such communications, presumably, would also show the true ownership of the said Kraken account prior to the filing of the complaint and TRO.

Based on the following evidence and reasoning, it shows that Tenreiro knew or should have known the Kraken account was a corporate account, and his failure to confirm this before alleging personal misuse could be seen as reckless, at its most favorable interpretation. Despite the critical importance of the Kraken account ownership to the SEC’s case, the FOIA response shows that the SEC did not verify the account ownership with Kraken. This raises questions about the SEC’s diligence and whether Tenreiro acted with reckless disregard for the truth.

Failure to Subpoena Kraken:

The apparent absence of a subpoena to Kraken supports the argument that the SEC did not take the necessary steps to confirm and verify the ownership of the account before making such a serious allegation.

Blockchain Tracing Capabilities:

Given the SEC’s access to blockchain analysis tools and expert witnesses, it would have been feasible to determine that the Kraken account was corporate rather than personal. This supports the argument that Tenreiro acted recklessly by not confirming this crucial fact.

Fraud Analysis: A Breakdown of the Fraud Elements and How the Evidence Fits Each Prong:

1. False Representation of Material Fact:

Tenreiro’s allegation through the SEC complaint, other pleadings, and witness declarations, that the Kraken account was a personal account belonging to Middleton and that he was misusing company funds is a false representation of material fact. The ownership of the Kraken account is a critical point, as it was central to the SEC’s justification for freezing Veritaseum’s assets, as the vast majority of funds flowed through this account.

Evidence: The Complaint, other pleadings, and witness declarations which Tenreiro expressly relied upon, allege that the account belonged to Middleton personally, despite a lack of verification from Kraken and a failure to subpoena Kraken.

2. Knowledge of Falsity or Reckless Disregard for the Truth (Scienter):

To satisfy this prong, there must be evidence that Tenreiro either knew the statement was false or made the statement with reckless disregard for the truth. The lack of communication with Kraken, apparent failure to subpoena Kraken as evidenced by the results of the FOIA request, and reliance on speculative analysis despite blockchain tracing capabilities indicate a reckless disregard for verifying the ownership of the account.

Evidence:

FOIA response indicating no communications with Kraken.

SEC’s failure to subpoena Kraken to verify the account ownership.

Availability of blockchain analysis tools, which could have provided insights into the account’s true ownership.

3. Intent to Induce Reliance:

The SEC, through Tenreiro’s and supporting declarations of the SEC’s expert witnesses, intended for the court to rely on the false statements that Middleton was misappropriating company funds. This was done to secure an emergency asset freeze against Veritaseum, which would prevent Middleton and the company from accessing its assets, and more importantly, to prevent Middleton and the companies from being able to defend themselves against the SEC’s allegations, therein depriving them of due process.

Evidence:

The SEC filed several declarations in support of its emergency application to freeze assets, intending for the court to rely on the misrepresentations of personal misappropriation and misuse.

4. Justifiable Reliance by the Plaintiff (the Court):

The court justifiably relied on the SEC’s allegations when it granted the emergency asset freeze. The court had no reason to doubt the veracity of the SEC’s claims at the time, as they were presented by an attorney representing a regulatory authority on extremely short notice on a Monday afternoon in a different NYC borough. Middleton’s/Veritaseum’s counsel told the Court that he did not have time to review the SEC’s submission and requested additional time to provide a full written response, which was denied by the Court.

Evidence:

The court granted the emergency asset freeze at 6:10pm August 12, 2019, based on Tenreiro’s and supporting declarations of the SEC’s expert witnesses, which presented the misrepresentations as fact.

Document Reference: Case 1:19-cv-04625-WFK-RER Document 9 Filed 08/12/19 Page 3 of 15, Temporary Restraining Order Freezing Assets, showing that the court relied upon the said documents for making the order.

5. Resulting Harm or Damages:

As a result of the numerous false representations, Veritaseum’s assets were frozen, preventing the companies from continuing their operations. This caused significant financial harm to Veritaseum, its token holders, and Reginald Middleton and his family, personally, amounting to tens of millions of dollars if not substantially more in utility, market, reputation, and brand value.

Evidence:

The asset freezes directly harmed Veritaseum by halting its operations and devaluing its token, leading to losses for stakeholders.

There is strong reason to believe that Jorge Tenreiro either knew the falsity of allegations contained in the Complaint and supporting declarations or acted with reckless disregard in claiming that the Kraken account belonged to Reginal d Middleton personally, as evidenced by the lack of direct communication with Kraken and the apparent failure to subpoena Kraken for verification. This satisfies the scienter prong of fraud under both state and federal law, especially if it is shown that Tenreiro had access to blockchain analysis tools that could have provided the necessary clarity.

The failure to verify the ownership of the account, coupled with the serious consequences of the asset freeze, meets the criteria for fraud: false representation, knowledge of falsity or reckless disregard, intent to induce reliance, justifiable reliance by the court, and resulting harm.

6. No Subpoena to Kraken:

The FOIA response revealed that there were no communications between the SEC and Kraken, raising doubts about how the SEC claimed Kraken "indicated" ownership without directly communicating with Kraken (24-04057-FOIA SEC Response to FOIA Request). This evidence sourced directly from the SEC itself, illustrates the SEC's claims were based on assumptions rather than verified facts, and that they had lied in their declarations about having communications with Kraken, as the FOIA response shows, which calls into question the integrity of the investigation and SEC action.

Alleged Dissipation of Assets Overseas, Director’s Remuneration and VeMetals Fund Flows:

Declarations from Ms. Roseann Daniello (Daniello):

Daniello’s declarations state that she is

Daniello’s first declaration^[16] provides detailed analysis of many items of expenditure made over several years involving the Defendants with numerous bank accounts, several crypto exchange platforms as well as digital assets held in numerous wallet addresses, with payments made to a plethora of suppliers, including employees and contractors, both in the United States and overseas. It is understandable that one can become easily confused and get “bogged down in the weeds” over the mass of such detailed analysis. Whereas Ms. Daniello was forthright in her first declaration, such confidence was not displayed in her supplemental declaration, especially following the comprehensive and detailed rebuttal contained in Mr. Middleton’s declaration^[17], together with voluminous supporting documentary evidence, which contradicted the inaccurate and incorrect assumptions made by both expert witnesses for the SEC and their lead trial attorney; Jorge Tenreiro.

Daniello’s supplemental declaration states in para 6

Admitting to errors being made.

Daniello’s supplemental declaration^[18] states in para 6

Here, Daniello is essentially admitting that a substantial sum of money, $1,410,788.43, had been spent by the Defendants for legitimate business operations, which she had originally flagged as suspicious, in the purchase of precious metals to back the sale of VeMetals tokens.

See sheet for detailed list of precious metals held by the Defendants to back VeMetals tokens sold and additional inventory in stock to cover anticipated future sales of such digital metals tokens together with a Precious Metals Balance Sheet^[20] showing the corresponding tokenized metals balance sheet. It should be noted that more physical precious metals were held in inventory than digital metals tokens sold, amounting to approximately $585,973.45, in anticipation of both increased orders and an increase in the price of gold, which was about $1200 per ounce at the time, illustrating the extremely conservative nature of the business.

Clearly, there was some confusion as to how VeMetals tokens worked by Tenreiro and both expert witnesses. In actual fact, a token holder would gain access to the VeADIR platform using VERI tokens and would avail themselves to discounted metals prices, being able to buy digital facsimiles of the physical metal desired, using cryptocurrency like ETH, but needing to have VERI tokens as well (in direct contravention to what was stated by Jorge Tenreiro in his Memorandum of Law for the SEC). Once purchased, a purchase of physical metal was made from Dillon Gage to physically back said digital metal token, or an allocation made from existing inventory.

Proceeds from the VERI token sales were used for the backing of digital tokens that were tradeable and directly were fully redeemable (for the physical underlying metals). This is exactly what was promised to stakeholders in the system, the ability to make peer-to-peer transactions of redeemable value – again, in direct contravention to what Jorge alleged in his complaint and various submissions to the Court. It should also be noted that these purchases for precious metals were from U.S. companies and storage of said precious metals were also in the U.S. Hardly the actions of a person seeking to abscond abroad with “ill-gotten” gains.

Payments made to recipients overseas^[21] listing all the overseas contractor recipients, matched against invoices from the respective contractors, provided by the Defendants in response to subpoenas, but Jorge Tenreiro omits to bring this fact to the Court’s attention, simply stating that

disingenuously inferring that these overseas payments represented a dissipation of assets outside US Jurisdiction, when he knew full well that they were payments to overseas contractors.

Daniello’s supplemental decl. para 28

A substantial sum on the face but this covers 28 months' worth of expenses in which the Defendants’ business was conducted over 4 continents: the US, Europe, Asia, and Africa.

A written Memorandum of Understanding (MOU) with the Jamaican Stock Exchange^[22] and a full Joint Venture agreement with the Nigerian Stock Exchange^[23], and pursued numerous deals in Montreal, Kingston, etc., and courted a half dozen other African exchanges through ASEA (African Securities Exchange Association). The Defendants also made progress with the Toronto Stock Exchange^[24]. They developed software out of Warsaw, Seoul, and Lagos and traveled for business to London, Amsterdam, Stockholm, Seoul, Monaco, and Dubai, among many other economic, technological, and financial hubs. Financial analysis was split between New Delhi and New York.

The Veritaseum enterprises were fast becoming a truly international business, that is until the SEC emergency TRO froze all its assets and destroyed the reputation of Mr. Middleton and annihilated the business, with false and misleading allegations of misappropriation and dissipation of assets.

It is worth noting that the supplemental declaration of Ms. Daniello^[25] unlike her considerably more deliberate first declaration, uses the following words or phrases, alongside which are thesaurus synonyms; "it appears" x 1 (seems), "I assumed" x 12 (took for granted), "assumptions" x 1 (speculation), "errors" x 2 (mistakes, blunders), "mistakenly" x 1 (wrongly, falsely) and "appear/appeared" x 3 (seems, looks as though). Since when did assumptions/taking for granted/seemingly/and looking as though constitute truthful and accurately verified facts? Yet Ms. Daniello goes on in her ending to “declare(s) under penalty of perjury that the foregoing” (seeming, assumptions, mistakes, blunders, wrongly appeared, looks as though) “is true and correct.”

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In the Complaint filed by the SEC, Tenreiro stated that “no such product existed,” referring to the VeADIR platform^[26] which Tenreiro witnessed in operation at his offices in New York, on or about March 9, 2018. It is alleged that Tenreiro was aware the platform existed and was functional even in beta, yet presented information to the Court that suggested otherwise. The mischaracterization being that Mr. Middleton had “defrauded” so-called “investors” into a scheme that was a sham, nothing there, when indeed a fully functional and operational platform did exist, and he knew it.

Tenreiro alleged the VeADIR platform was not fully operational at the time of filing the Complaint. While technically correct, this is disingenuous, because Mr. Middleton was instructed by the SEC ^[27] to shut it down. Mr. Middleton duly obliged, and by omitting to tell the Court this pertinent fact, Tenreiro committed a fraud on the Court. Tenreiro makes no further mention of whether the VeADIR platform was or was not in existence in the application for a preliminary injunction, choosing now to ignore the subject.

Tenreiro consistently misrepresented facts by cherry-picking words and phrases used by Mr. Middleton over the years, in countless documents and posts, which are always recited out of context. The allegations contained therein are robustly dealt with in Mr. Middleton’s Opposition to the TRO^[28] and Declaration of Reginald Middleton ^[29].

Tenreiro states,

Here, Tenreiro chooses to portray legitimate payments to overseas contractors as some diversion of funds, and thereby dissipation of assets, in seeking to justify his request for a continuing asset freeze. Both allegations are untrue, as Tenreiro knew from Daniello’s (materially corrected after Middleton’s rebuttal) supplemental declaration and exhibit 29^[30] referred to therein. By its very nature, the blockchain is a visible public ledger, and any transfers made can be fully traced if you have the wallet address from which they were made, which the SEC did have, so it is false to make that statement, as such.

Tenreiro states in his Argument for a Preliminary Injunction^[31] that “now that Middleton has abandoned the projects in which they invested,” and further adding in note 8 thereto that “Middleton seeks to blame the SEC for his abandoning the ‘VeADIR.’” This is totally false, and Tenreiro knows this. See email dated March 13, 2018, from David Kornblau^[32] to Mr. Middleton, referencing a telephone call with SEC staff, Ms. Valerie Szczepanik & Jorge Tenreiro, saying that he had received a call from the SEC instructing Mr. Middleton to effectively shut down the VeADIR platform, along with the Middleton deposition extract contained above.

Tenreiro speculates that

and infers to the Court that Mr. Middleton “may attempt” to do so, when he knows full well that those said overseas payments were made to overseas contractors for goods and services rendered to the Defendants in their normal course of business. This constitutes a misrepresentation and mischaracterization made to the Court.

Tenreiro states,

The international contacts referred to were business contractors to Veritaseum, and he knew that. He also knew that ETH conversions to fiat were made in the Kraken account of Veritaseum LLC with which to pay said international contractors. This is all a matter of record, and Daniello has alluded to it in both her declarations, all such payments being in the normal course of business.

Tenreiro states that

See Supp. Daniello Decl. 28^[33]; He also suggests that

Tenreiro knows full well that these payments were made to international contractors of the business but chooses to misrepresent such payments as some sinister plot to secret away funds beyond the U.S. jurisdiction. This was blatantly false. Furthermore, and as previously stated, blockchain, by its very nature, is a public record on an openly visible ledger, and if one has the wallet address, then any transfers can be traced. The SEC had all ETH wallet addresses in use, so they could trace any transfers at any time.

There was no diversion of ICO offering proceeds. The Defendants purchased physical gold to back the VeGold digital metal assets offered to VERI holders at a discounted rate as part of a growing list of utilities provided to the token holders. The payment of overseas contractors for services provided to Veritaseum does not constitute “continued transfers of assets abroad,” disingenuously implying that funds were being secreted abroad. “The nature of blockchain” provides for complete transparency of transfers on a publicly visible blockchain, and to imply they are secret in any way is a complete falsehood.

Compare that to paragraph 3 of Doody’s first declaration, whose job it is to

Emphasizing the fact that blockchain transactions can be tracked and traced, and it was Doody’s job to do so, and for Tenreiro to suggest otherwise is completely disingenuous.

The egregiousness of Tenreiro’s statements is exacerbated by the fact that his own forensic accountant, Daniello, changed her testimony to correct her false allegation that Middleton sent monies abroad to unknown accounts. Yet Jorge continued to push continuous fraudulent statements to the Court. It is evident that these misleading statements were, without a shadow of a reasonable doubt, purposely fed to the Court since Tenreiro was the lead trial attorney on this case, and he was the one who introduced Ms. Daniello’s initial false testimony as well as her corrected statements, which he referred to in his declaration and memoranda of law.

“To be sure, courts look to equitable factors, primarily whether a freeze “might thwart the goal of compensating investors.” The SEC’s actions have done nothing but harm the so-called “investors” and the number of claimants (175) to make a claim on the VFF is evidence of complete disgust with the SEC’s actions in allegedly “protecting the interests of investors.” Besides, the sums tendered did not compensate “investors” in any meaningful sense. It would have been far better had they had their original subscription repaid in specie (ETH), as opposed to the monetary value spent at the time of purchase of said VERI tokens. Reference the online VERI token holder petition^[34] signatures and view the comments made by token holders (currently standing at 1,024 comments from 2,204 signatures and counting).

More falsehoods from Tenreiro, falsely misrepresenting the urgent need for “an asset freeze” as the Defendants have shown above that there was no diversion of assets as falsely alleged and that the frequent transfers of money abroad equated to payment of overseas contractors, that Tenreiro knew full well. The point regarding full transparency of transfers on the blockchain is made again. Most importantly is the blatant disregard for respect of the Court and Tenreiro’s willingness to defraud the Court is evident. At no time did the Defendants concede. Mr. Tenreiro fed multiple troves of false and inaccurate information to the Court in his pursuit of an “emergency” TRO and Preliminary Injunction that was neither an emergency nor accurate. Tenreiro reiterated his falsehoods in his follow-up submission to the Court, even though his own SEC-employed forensic accountant and his paid expert witness were forced to concede that they fed false information to the Court, and he did this in the very same submission. The repercussions of his actions in this instance alone could be quite severe.

As stated above, Mr. Tenreiro has shown an alarming propensity to misrepresent, mischaracterize, and outright lie, selectively portraying half-truths to suit his ends and to portray Mr. Middleton as some sort of arch-villain or conman, hell-bent on defrauding innocent victims when nothing could be further from the truth. This is done on such a systematic and consistent basis that it amounts to serious misconduct, frequently committing fraud upon the Court. Furthermore, Mr. Tenreiro omitted to inform the Court about the true ownership of the Kraken account, through which the vast majority of ETH was funneled, to convert into USD and fund payment of normal business, software development, and operational expenses, despite those “corrections” having been made by the two expert witnesses. This was a grave omission as the SEC’s case largely rested upon the allegation that those vast sums were directed into that account and that it was held personally by Mr. Middleton—a complete falsehood.

Mr. Middleton provided two declarations strongly refuting the SEC’s allegations and are repeated herein in their entirety as if fully set forth herein, in relation to the movement, ownership, and disposition of funds, the trading activity of VERI tokens on the Etherdelta exchange, and the existence of a fully functional and operational platform, including the voluminous documentary evidence exhibited thereto, against the SEC’s circumstantial and interpretive claims.

Despite five full days of depositions made by Mr. Middleton and his staff and the volumes of documentary evidence from multiple sources, including emails, telephone & trading records, concerning both the movement of funds and actual physical evidence showing ownership of all accounts, including the Kraken account, during the SEC’s two-year investigation, the lead attorney; It is alleged that Mr. Tenreiro may have misrepresented to the Court that Mr. Middleton had ‘no such product,’ despite having been present for a demonstration of the VeADIR platform at the SEC’s offices. Allegations also suggest that Mr. Tenreiro may have made inaccurate statements regarding the misappropriation and dissipation of funds.

Notwithstanding the lack of evidence (definitive or otherwise) that Mr. Middleton inappropriately moved corporate assets to his personal account, the SEC falsely represented such claims to the Court. The reservations and concessions from their own expert witnesses, Roseann Daniello and Patrick Doody, highlight this.

The SEC misrepresented routine business transactions as suspicious activities or attempts to dissipate assets when such transactions were consistent with Veritaseum’s business practices and included regular purchases of gold to back VeGold tokens. Payments from Veritaseum to Dillon Gage for purchasing gold were regular and documented, supporting Mr. Middleton's assertions of routine business practices, instead, the SEC portrayed them as unusual and suspicious.

VeGold, VeSilver, and VePalladium tokens were backed by physical precious metals, a fact downplayed by the SEC. Their filings emphasized ETH transactions without fully acknowledging the gold backing of VeGold and other precious metals tokens. This selective emphasis misled the Court about the nature and value of the digital metals' tokens.

Ms. Daniello originally suggested that the Kraken account was in Mr. Middleton’s name for personal use but admitted the ownership of the Kraken account was ambiguous, with potential links to Eleanor Reid. Daniello admitted that the documentation did not definitively prove Mr. Middleton's exclusive control over these accounts. Daniello also conceded that some blockchain transfers she had originally flagged as suspicious were regular transactions related to business operations and not indicative of fraud.

The SEC exaggerated the necessity and urgency for an emergency asset freeze without having a robust factual basis, countered by Mr. Middleton’s thorough documented evidence of standard business operations.

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Tenreiro knew or ought to have known, prior to the filing of the Complaint/TRO, that the Kraken account (the main crypto account) was not in Mr. Middleton’s name, but in the name of Veritaseum LLC., information having been previously furnished to the SEC during their investigation, from both the Defendants and Kraken. However, he presented it in a way that gave the Court the false and misleading impression that Mr. Middleton was misappropriating assets. Despite having an opportunity to correct this grave “error” in his application for the Preliminary Injunction, he failed to do so, even though the two expert witnesses on behalf of the SEC did so.

Tenreiro misled the Court about the trading activity conducted by Mr. Middleton on the Etherdelta exchange to simply test the new site for suitability and liquidity as an option for small buyers of the VERI token. This has been clearly established above in detail.

Tenreiro misled the Court into believing that vast sums of money were flowing into Mr. Middleton’s hands when that simply was not the case, giving the Court the impression that Mr. Middleton was misappropriating assets.

Tenreiro falsely alleged^[35] that the "Defendants only offer evidence that they were negotiating such deals," when in reality, the Defendants had a signed MOU with the JSE^[36] and a signed Joint Venture agreement with the NSE^[37], well past the "negotiating" stage. This misrepresented the true level of development in international agreements with substantial partners to cast the Defendants in a negative light.

Tenreiro alluded to $1.7M paid into Mr. Middleton’s personal account as a dissipation of assets, when in fact, it was a series of periodic payments made over 27 months, representing a reasonable remuneration for a CEO of a company of similar capital value at the time. He misled the Court into believing that this was misappropriation of assets. The complaint also alleged that

It’s inconceivable to anyone that a CEO of a multi-billion-dollar enterprise, at the time, would not be paid a salary, but Tenreiro chose to portray it this way.

Tenreiro knowingly misrepresented the true nature of international payments made by the Defendants, misleading the Court into believing that some method had been devised for the dissipation of assets by Mr. Middleton, when in fact it was the payment of contractors working overseas. Ms. Daniello had prepared an exhibit in her declaration clearly showing this fact and that such payments had been reconciled against invoices received, otherwise she would have flagged them. Tenreiro failed to inform the Court of that fact.

The VERI token holders, through counsel, sent the SEC’s Corporate Finance division a request for a “No-Action Letter” (NAL)^[38] electronically submitted on May 13th, 2021, and their response was handled by a teleconference^[39] on June 11th, 2021, between attorney Jeremy Hogan (for the VERI token holders) and four SEC Attorneys, including Mr. Jorge Tenreiro. It is alleged that the presence of Mr. Tenreiro during the teleconference call may have violated SEC ethical standards, as he reportedly led the meeting and made statements that could be interpreted as coercive. This is conduct that is prejudicial to the administration of justice.

The VERI token holders were denied the NAL, and Mr. Hogan was told to warn the said token holders that the VERI token was a security and that they could not sell, transfer, or otherwise dispose of their tokens. This was received as a not-so-veiled threat. Since then, we have had some clarity from the Honorable Judge Torres’ ruling in the SEC v Ripple Labs (XRP) case^[40] about the sale of such “securities” in the secondary market. Such threats and intimidation are at the very least, unprofessional and conduct unbecoming.

Tenreiro had reportedly aggressively pursued numerous VERI token holders, trying to convince them that they were victims of a Ponzi scheme and fraud, even when these individuals explicitly stated that they did not consider themselves as such,

and in an attempt to “press gang” them into giving evidence against Mr. Middleton. Please see the affidavit of Lloyd G. Cupp III^[41], where Mr. Trey Cupp claims:

If these were just isolated incidents of misrepresentation, mischaracterization, omission, or deceptive portrayal of evidence, then perhaps one might be forgiven. Whether arguably forgivable or not, that is clearly not the case here. The consistent and systematic frequency of occurrence, coupled with both the harassment and attempts at coercing witnesses to provide the “desired” testimony, amount to nothing less than serious misconduct and gross unprofessionalism.

The original Complaint and emergency TRO application were made on less than 24 hours’ notice, with opposition counsel given a 3-inch bundle of documents to plow through minutes before appearing before the Miscellaneous Judge for the day. Opposing counsel was denied the opportunity to provide a full written response, so these issues could not have been brought to the Judge’s attention in time to prevent catastrophic damage to the Veritaseum businesses, the VERI token holders, and Mr. Middleton himself.

The SEC did not accurately portray the consequences of the asset freeze on Veritaseum’s operations and its token holders, leading to significant hardships for both the Defendants and token holders alike.

In light of these revelations, the SEC should never have been granted the emergency TRO. On equitable grounds, using the unclean hands doctrine, the SEC should never have benefited from its misconduct. Misrepresentations and disruptive actions would have precluded them from seeking equitable relief. They had clearly acted unethically and/or in bad faith.

Strong comparisons can be made between this case and the “DebtBox” case^[42] with the SEC, whereby, having employed similar strategies in both the Defendants and DebtBox cases, such as alleging fraud and requesting emergency asset freezes, crippling the entities financially, and effectively destroying the businesses and reputations of the principals, making it almost impossible to effectively mount a proper defense, whilst defrauding the Court, and the consequences that follow. Additionally, there are comparisons with the SEC v Ripple Labs case, however, in Ripple’s case, they spent well over $100M+ on their defence and were able to achieve some measure of success, yet DebtBox was unable to do so and effectively went bankrupt. Likewise, the Defendants were unable to secure such stupendous amounts for a defence fund and were either forced into making a deal or face bankruptcy, in essence, held "over a barrel". And that that would still apply, notwithstanding having a rock-solid defence to the allegations made or the SEC's case against you was fabricated and completely meritless, as the Token holders contend was the position in this case.

To further illustrate inconsistencies and contradictions made by Tenreiro in the very same document; the complaint see;

So, in the space of a few short paragraphs within the SEC’s complaint, Mr. Middleton had gone from being the sole owner, to dominating the Veritaseum companies to having shareholders, illustrating a failure to exercise due diligence in ensuring both the veracity and accuracy of the allegations being made. This also shows a failure in understanding the relationship between the various Veritaseum companies comprising the Veritaseum Enterprises, resulting in misrepresentations and misleading statements made to the court.

The SEC’s two-year investigation placed an incredible financial and operational strain on the fledgling startup, causing massive disruptions, $1.3M in legal fees, and an incalculable drain on employees’ and CEO’s time in dealing with the SEC’s unending subpoenas and other informal requests for documentary evidence and testimonies by deposition.

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Fraud on the Court: Presenting false or misleading information to obtain favorable rulings, particularly in the context of securing emergency relief like a TRO, can constitute fraud on the court. Fraud on the court undermines the integrity of the judicial process and is a serious offense that can lead to the vacating of court judgments obtained under such circumstances.

Breach of Ethical and Professional Standards: Under the American Bar Association (ABA) Model Rules of Professional Conduct:

• Rule 3.3: Requires attorneys to avoid knowingly making false statements or failing to correct them once discovered. Continuing to pursue legal strategies based on false information (even after learning of the error) violates this rule.
• Rule 8.4: Prohibits attorneys from engaging in conduct involving dishonesty, fraud, or misrepresentation. Tenreiro’s failure to correct the false statements regarding the Kraken account ownership, even after it was known, constitutes a breach of this rule.

Relevant Rules of Professional Conduct Violated thus far:

• Rule 3.3(a)(1) - Candor Toward the Tribunal: A lawyer shall not knowingly make a false statement of fact to a tribunal.
• Rule 8.4(c) - Misconduct: Engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation.

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• Rule 3.3(a)(1) and (3): Duty to correct false statements and not to offer evidence known to be false.
• Rule 8.4(d): Conduct that is prejudicial to the administration of justice.

Improper Influence on a Witness

Description of Misconduct: Attorney Tenreiro allegedly attempted to coerce Mr. Trey Cupp, a Veritaseum token holder, into providing testimony that would support the SEC’s case. Despite Mr. Cupp’s assertion that he had not been defrauded by Veritaseum, Mr. Tenreiro pressured him to change his testimony to align with the SEC’s narrative. This coercion compromised the fairness of the judicial process and contributed to rulings that harmed Veritaseum and its token holders.

Supporting Evidence: Affidavit of Trey Cupp

"I informed SEC staff that I did not believe I was defrauded by Veritaseum or Mr. Middleton. Despite this, I felt pressured to provide statements that would suggest otherwise."

Document Reference: Trey Cupp Affidavit

Relevant Rules Violated:

• Rule 3.4(a)(1): Unlawfully obstructing another party’s access to evidence or unlawfully altering, destroying, or concealing a document.
• Rule 4.1: Making false statements to third persons.
• Rule 8.4(b) and (d): Engaging in conduct that is prejudicial to the administration of justice.

Conclusion and Request for Investigation

Based on the detailed allegations and supporting evidence, I believe that Attorney Jorge G. Tenreiro has violated multiple provisions of the New York Rules of Professional Conduct. His actions have caused significant financial and reputational harm to VERI token holders, like myself, who relied on Veritaseum’s platform for legitimate purposes. His ethical breaches, including misrepresentation, failure to correct falsehoods, and witness coercion, have severely disrupted Veritaseum’s operations and caused substantial loss for token holders.

I respectfully request that the Attorney Grievance Committee conduct a thorough investigation into Mr. Tenreiro’s misconduct. The outcome of this investigation will be crucial to upholding the integrity of the legal profession and ensuring that no further harm is caused to those affected by his actions.

Cordially and Respectfully submitted,

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