The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Touzi Capital, accusing the investment firm of defrauding more than 1,200 crypto investors by misleading them about the liquidity and profitability of its crypto asset mining fund.

According to the SEC’s statement on Nov. 29, Touzi Capital raised nearly $95 million from investors under the pretense of funding crypto mining operations. However, the regulator claims that the firm instead diverted the funds into unrelated ventures through its subsidiaries, deceiving investors with promises of stability and high returns. The SEC alleges these investments were portrayed as being as safe as high-yield money market accounts, while, in reality, they were risky and illiquid.

Even after its investments began failing, Touzi Capital allegedly continued to accept funds from new investors. The SEC asserts that the firm not only misrepresented the risks involved but also falsely assured investors of the fund’s profitability.

This lawsuit follows a broader crackdown by the SEC on crypto-related misconduct. A separate case involving promoter Kristoffer Krohn, who was accused of participating in an $18 million fraudulent crypto mining scheme, highlights the ongoing legal scrutiny of the crypto sector. Krohn’s appeal to dismiss the charges was recently rejected by a federal judge.

The SEC’s aggressive actions may face a turning point, however. ConsenSys CEO Joe Lubin speculated during DevCon 2024 in Thailand that regulatory pressure on the crypto industry could ease significantly if Donald Trump secures reelection as U.S. president. Lubin suggested that such a shift could save the industry hundreds of millions in legal expenses.

The case against Touzi Capital underscores the SEC’s commitment to policing crypto markets, raising questions about the future of crypto regulation and investor trust.