SEC Charges Crypto Entities with Unregistered Coin Offering

The SEC charged three cryptocurrency entities and their founder with engaging in the unregistered offering of a crypto-asset.

In the Complaint, filed in the Western District of Washington, the SEC alleged that the three entities and their founder illegally raised over $16 million in investments through (i) an unregistered coin offering, which raised approximately $14 million, and (ii) additional coin sales after the initial offering, which brought in another $2.5 million. The SEC alleged that the entities offered a crypto-asset without registering such offerings with the SEC, and never filed a registration statement. Instead, the entities created their own market for the token that was offered, where the entities could control the information provided to investors. Further, the SEC argued that the entities used the coin offering to pay for services provided to its blockchain technology, which also constituted an unregistered offering.

The SEC accused the entities and their founder of violating Sections 5(a) and 5(c) of the Securities Act ("Prohibitions relating to interstate commerce and the mails"). The SEC is seeking relief in the form of (i) a permanent injunction, (ii) disgorgement of the ill-gotten gains and (iii) civil monetary penalties against each entity and the founder.

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