The US Securities and Exchange Commission (SEC) has served a $4 million fine to Coinme over its initial coin offering (ICO) of UpToken.
Based on the SEC’s order, the UPToken ICO, which Coinme and its subsidiary conducted from October 2017 to December 2017, was an investment contract based on the Howey test.
The SEC also believes that the company’s offer of unregistered securities to crypto investors and traders was “misleading,” necessitating the fine.
SEC Serves Coinme $4 Million In Fines
Recently, the SEC stated that Coinme’s misleading marketing strategy violated securities laws as Coinme did not register the tokens as securities, and the company did not qualify for an exemption from registration requirements.
According to the SEC’s filing, the company raised about $3.6 million from its initial coin offering. This amount was to fund the expansion of the company’s Bitcoin ATMs. Notably, the firm added 30 ATMs using the funds generated from the ICO.
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The charges from the SEC also extended to the company’s CEO, Neil Bergquist, and the subsidiary firm, Up Global SEZC. Aside from the estimated $4 million penalty on Coinme and Bergquist, there is a separate penalty against them: a $250,000 and $150,000 fine, respectively. Both parties have agreed to pay all fines and desist from further violations of securities laws.
The SEC believes that crypto investors and traders are entitled to truthful disclosures from issuers of securities, whether digital or otherwise. As such, Coinme’s misleading marketing tactics deprived investors of essential information and prevented them from making informed investment decisions.
SEC Takes Action Against Fraudulent Activities
The SEC has recently been cracking down on fraudulent ICOs and unregistered securities offerings. This latest action against Coinme shows that the regulator remains vigilant in its enforcement efforts and is willing to take action against companies that violate securities laws.
In 2017, the SEC created a special unit dedicated to investigating cyber-related securities violations, including those involving ICOs. Since then, the SEC has taken numerous actions against companies and individuals for alleged fraudulent ICO activities.
The SEC has warned investors about the risks associated with unregistered ICOs and has taken enforcement action against several companies for violating securities laws.
One notable ICO lawsuit is the SEC Vs. Ripple and its executives that has dragged on for three years. The crypto industry awaits the summary judgment, which might categorize many other assets under securities or vice versa.
Other authorities, like the APAC regulators, have also taken action against individuals and companies for making false or misleading statements concerning crypto frauds, including misrepresenting the nature of the investment or failing to disclose important information to investors.
Featured image from Pixabay and chart from Tradingview
