Earlier this week, the Securities and Exchange Commission made the headlines by striking down the Founder of EtherDelta, a decentralized exchange platform that offers services for Ethereum-based tokens. This had grabbed the attention of several people involved in the space as it was the first time a Founder was scrutinized by the SEC. This also sent across a strong message to the entire community, i.e., the developer will always be responsible for their innovation.
Now, the SEC is back in the limelight, striking down two ICOs at the same time. The projects that were targeted by the SEC are Paragon Coin Inc. and CarrierEQ Inc [Airfox], both of which are Ethereum based and the ICOs were conducted in the year 2017.
The commission claims that the ICO was conducted after they released a report on their investigation of DAO aka Digital Decentralized Autonomous Organization, the main reason for the split of the Ethereum blockchain. The commission added that according to the DAO report, ICOs can be classified as securities offering.
Additionally, Airfox raised around $15 million worth of cryptocurrencies for the development of their project. The project pitched by the team during the ICOs was creating tokenized ecosystem that enables users to earn tokens and exchange the tokens for data. Whereas, Paragon raised $12 million worth of cryptocurrencies for the development of a product i.e, introducing the blockchain technology in the cannabis industry.
Since both the ICOs were not registered under the Federal securities laws, the SEC has imposed a penalty of $250,000 each against both the companies. Moreover, they are required to compensate “harmed investors” who took part in the ICO and also file a report with the SEC on a periodic basis for at least a year.
Stephanie Avakian, co-director of the SEC’s Enforcement Division said:
“We have made it clear that companies that issue securities through ICOs are required to comply with existing statutes and rules governing the registration of securities. 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.”
Steven Peikin, co-director of the SEC’s Enforcement Division stated:
“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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