SEC Charges Individuals with Promoting Unregistered Digital Asset Securities

The SEC charged five individuals for their promotion of a global unregistered digital asset securities offering, which raised over $2 billion in retail investments.

In a Complaint filed in the U.S. District Court for the Southern District of New York, the SEC alleged that an unincorporated organization solicited the promoters to offer and sell investments into its "lending program" without registering the offering with the SEC. The SEC stated that the promoters, who were not registered broker-dealers, were tasked with advertising to prospective retail investors the merits of investing in the lending program, and received in return a percentage of the invested funds they secured. The SEC claimed that the promoters received "referral commissions" for each loan they brought in, and the top promoters were awarded extra sales commissions entitled "development funds."

As a result of its findings, the SEC charged the promoters with violations of Section 5 ("Prohibitions Relating to Interstate Commerce and the Mails") of the Securities Act and Section 15(a) ("Registration of All Persons Utilizing Exchange Facilities to Effect Transactions; Exemptions") of the Exchange Act.

The SEC is seeking (i) permanent enjoinment, (ii) disgorgement with interest and (iii) civil money penalties.