SEC Clamps Down on Two Cryptocurrency Companies, Orders Refund of Money to Investors
It seems like the authorities are no longer content to sit back and allow the crypto industry to regulate itself, as they are becoming more involved. Two cryptocurrency firms have been ordered by the United States Securities and Exchange Commission (SEC) to return funds gotten during their initial coin offerings (ICO) to investors. The reason for this action? According to the SEC, the companies failed to register their ICOs with federal regulators.
The companies – CarrierEQ and Paragon Coin – reached a settlement deal with the SEC and were given a fine of $250,000 each. As part of the deal, the companies will not only return the money to investors, they will each have to “file financial statements and other documents that give prospective investors, a window into the health of the business.” This line of action will be the first ever in the history of ICOs.
Stephanie Avakian, the co-director of the Enforcement Division of the SEC said in a statement that “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.” She also sounded a note of warning: “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.”
CarrierEQ, also known as Airfox, offers its services in emerging markets. In October 2017, the company raised $15 million in its ICO. On the other hand, Paragon is a company using blockchain technology to “manage supply chain tracking for the marijuana industry.” The company raised $12 million in an ICO held in August.
It is pertinent to note that the SEC did not accuse the companies of engaging in any fraudulent activities. In addition, the companies themselves neither denied nor admitted to the findings of the SEC as contained in the settlement. The SEC discovered that the tokens issued by the companies should have been registered as either securities or investments that would have given investors returns if they become profitable.
The US Securities and Exchange Commission has come down hard on two cryptocurrency companies for failing to register their ICOs with federal regulators. The firms, which reached a settlement deal with the SEC, were also fined $250,000 each. In addition, the SEC ordered the cryptocurrency companies to return all funds gotten from the ICOs to investors. This would be the first time that such a groundbreaking action has been taken by regulators in the wild crypto terrain.
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