SEC Update: Two ICOs Settle Charges, Will Register as Securities Tokens
The Securities and Exchange Commission, America’s top securities regulator, has announced two Initial Coin Offering projects have settled charges for securities registration violations. As part of the deal, the two projects will go through a series of rehabilitative hoops, including registering their assets as securities tokens.
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Pay the Piper, Securities Tokens’ Edition
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.
The judgment is an unprecedented one for the cryptoverse, insofar as it further formalizes the SEC’s regulatory purview over token offerings, a purview that had previously been debated in the space.
Two ICO issuers settle SEC registration charges, agree to register tokens as securities https://t.co/Rj1UYpd5ON
— SEC_News (@SEC_News) November 16, 2018
“Both companies have agreed to return funds to harmed investors, register the tokens as securities, file periodic reports with the Commission, and pay penalties,” the SEC said.
Those penalties amount to $250,000 USD for both Airfox and Paragon.
The SEC found both projects had offered unregistered securities via ICOs after the Commission declared in 2017 that it considered such offerings as akin to securities offerings.
Airfox had raised $15 million in its ICO, whereas Paragon came in just under that at $12 million in its own offering.
The November 16th orders come after the SEC settled charges with EtherDelta founder Zachary Coburn earlier this month over his previous role in operating an “unregistered national securities exchange.”
Step Back, Lest a Red Line Is Crossed
The SEC feels they’ve been clear all along about their securities registration standards, but now their latest judgments have made their stance that much clearer.
Make unregistered securities-like offerings through tokens at your own peril, so the Commission has warned.
“These cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets,” SEC Enforcement Division co-director Stephanie Avakian commented.
Indeed, it’s precisely that vigilance that caused Munchee Inc. to rescind its ICO in December 2017.
The SEC highlighted that rescindment in their latest announcement, noting the Munchee team didn’t deliver tokens to its ICO participants and instead returned all investments upon raising the ire of the Commission.
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.
What’s your take? Is the SEC about to settle a lot more charges with a lot more securities tokens projects? Let us know what you think in the comments section below.
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