ICO Issuers Settle Registration Charges With SEC

SEC Charge Two ICO Startups for Failing to Register Their Tokens As Securities

SEC Charge Two ICO Startups for Failing to Register Their Tokens As Securities

The Securities and Exchange Commission was slow to take action past year as dozens of companies held so-called "initial coin offerings" or ICOs, which involve selling cryptocurrency tokens to the public.

On November 16th, the SEC declared a settlement of charges against CarrierEQ Inc. and Paragon Coin Inc., respective operators of the Airfox and Paragon Coin ICOs, for failing to register their tokens with the Commission as securities.

Republican Rep. Warren Davidson, of the 8th district of the state of OH, is reportedly weighing up a prospective bill which would treat ICOs as a type of product, rather than a form of security, thereby reducing the influence and oversight of the Securities and Exchange Commission (SEC).

"As I said when my office first began its sweep of ICOs a year ago, there is little question that many of these ICOs constitute securities offerings which need to be registered or exempt from registration in the Commonwealth", Massachusetts Secretary of State William F. Galvin said in a statement. The price of many tokens has since collapsed 90% amidst the popping of the crypto bubble, and as numerous projects touted in the ICOs have failed to materialize as promised. SEC and refund investors who participated in the token sale.

Yesterday the Wall Street Journal published an article stating that the SEC subpoenaed the crypto lending firm SALT Lending along with ShapeShift CEO Erik Voorhees.

In the United States at least, tokens and ICOs have two choices: either completely block out investors from the USA participating in ICOs or cooperate with the SEC to distribute tokens as a registered security.

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The SEC settlement documents illustrate a somewhat-disconcerting accuracy on the part of the agency, which has only previously prosecuted one non-fraud ICO case (a company called Munchee which simply backed out upon contact, giving all the funds back). Paragon was able to raise "approximately $12 million worth of digital assets during the offering".

The decision may also suggest that pre- DAO ICOs could receive a pass from the SEC Enforcement Division.

What are your thoughts on the two ICOs being ordered to register their tokens as securities?

And more projects may be finding themselves in similar positions to Airfox, Munchee, and Paragon in short order, as it looks like the SEC is only just getting started with its ICO enforcement actions. Each company will pay a $250,000 fine to the SEC and compensate investors who purchased the tokens.

Steven Peikin, co-director of the SEC's enforcement division, added, "By providing investors who purchased securities in these ICOs with the opportunity to be reimbursed and having the issuers register their tokens with the SEC, these orders provide a model for companies that have issued tokens in ICOs and seek to comply with the federal securities laws".

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