The United States Securities and Exchange Commission has continued its in-depth assessment of Initial coin offerings (ICOs) with the body reaching a settlement on two crypto startups. Initial coin offerings (ICOs), may be important platforms for crypto projects to raise funds, but these platforms must also operate in accordance with the regulatory requirements spelled out by the SEC. The two crypto projects to have drawn the attention of the SEC lately are Airfox and Paragon Coin Inc.
Airfox and Paragon Coin Inc., both launched successful ICOs in 2017 raising $15 million and $12 million respectively according to statements made available. What raised eyebrows though, was the fact that neither crypto startup had classified their ICO as a security offering at the time. This means that neither project qualified to get exempted from having to register with the commission. Both Airfox and Paragon Coin Inc. were therefore in violation of the regulatory body’s regulations. The SEC’s comment on the matter read as follows; “These are the Commission’s first cases imposing civil penalties solely for ICO securities offering registration violations.”
Last Friday, the 16th of November saw an announcement made by the SEC confirming that the two crypto startups in question were going to be registering their ICO’s as securities. Both Airfox and Paragon Coin Inc. have agreed to refund the investors that had been misled by their ICO’s. The SEC has also slapped a 250,000 fine on each of the startups and has instructed them to submit periodic reports to the regulatory body.
The SEC’s enforcement division has Stephanie Avakin as one of its co-directors who had this to say about the case; “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.”
The other co-director, Steven Peikin, also chimed in stating that; “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.” This announcement elicited a lot of Twitter activity with a lot of ICO skeptics taking a victory lap.