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  • SEC settles with company over misrepresentation of ICO

    Securities

    On July 14, the SEC announced a settlement with the owners and operators of a software platform provider, resolving allegations that the company violated anti-touting provisions by failing to disclose the compensation it received from issuers of the digital asset securities it profiled. According to the order, the company’s website, which was accessible in the U.S. from 2016 to August 2019, publicized offerings for digital tokens. The platform claimed to “list” or profile the “best” token offerings, such as so-called initial coin offerings (ICOs) and initial exchange offerings. The company also allegedly claimed that its “mission [was] to make it easy and safe for people around the world to join ICOs.” According to the order, the platform profiled more than 2,500 different token offerings, which compromised fundraising of over $10 billion. The SEC alleged that the company violated provisions of the Securities Act, such as Section 2(a), because the digital tokens publicized by the company included those that were offered and sold as investment contracts, and 17(b), because the company promoted a security without disclosing that they received compensation for doing so. The order, which the company consented to without admitting or denying the findings, imposes a civil money penalty of $154,434 and $43,000 in disgorgement, and provides that the company must cease and desist from committing or causing any future violations of the anti-touting provisions of the federal securities laws. SEC Commissioners Hester M. Peirce and Elad L. Roisman dissented from the settlement, stating they agreed that “touting securities without disclosing the fact that you are getting paid, and how much, violates Section 17(b)” but “[they] are disappointed that the Commission’s settlement with [the company] did not explain which digital assets touted by [the company] were securities[.]”

    Securities Enforcement Initial Coin Offerings SEC Securities Act Fintech Digital Assets

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  • SEC settles with blockchain company over unregistered ICO

    Securities

    On June 22, the SEC announced a settlement with an intellectual property search software platform provider and its CEO resolving allegations that the company made materially false and misleading statements in connection with an unregistered initial coin offering (ICO) of digital asset securities. According to the order, the company raised $7.6 million from investors by offering and selling digital tokens. In promoting the ICO, the company and its CEO made multiple materially false statements to investors and potential investors, including false statements about the company’s revenues, number of employees, and the platform’s user base. The SEC alleges that the company violated Section 5(a) and 5(c) of the Securities Act because the digital assets it offered and sold were securities under federal securities laws, and the company did not have the required registration statement filed or in effect, nor did it qualify for an exemption from registration. The order, which the company consented to without admitting or denying the findings, imposes a $7.6 million penalty, and requires the company to “destroy all [of the digital tokens] in their possession or control,” publish notice of the order on the company’s social media accounts, request removal of the tokens from trading platforms, and refrain from participating in future offerings of a digital asset security.

    Securities Enforcement Initial Coin Offerings SEC Securities Act Fintech

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