SEC Charges Tech Company for Unregistered Crypto-Securities Offerings
The SEC charged a technology company, its current CEO, and its co-founder and executive chairman of its board (collectively, the "defendants") with conducting an unregistered, ongoing digital securities offering.
In a complaint filed in the U.S. District Court for the Southern District of New York, the SEC alleged that since 2013, the defendants sold $1.38 billion of a digital currency, without registering the offers or sales of the currency in violation of Sections 5(a) ("Sale or delivery after sale of unregistered securities") and 5(c) ("Necessity of filing registration statement") of the Securities Act. As a result of the illegal securities offering, the complaint alleges that the two executives profited by approximately $600 million.
The SEC claimed that, since the company never filed a registration statement, it failed to provide investors with material information required of issuers when soliciting investments, including how it used the investments to fund its operations. The SEC alleged that the defendants engaged in this illegal offering despite receiving legal advice that indicated the offering may be considered an "investment contract" under certain circumstances, and therefore would be subject to federal securities laws.
The SEC is seeking a final judgment to (i) permanently enjoin the defendants from further violations, (ii) order the defendants to disgorge ill-gotten gains, including prejudgment interest, (iii) bar the defendants from participation in any digital asset security offering and (iv) impose civil money penalties.
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