Stricter than ever, the SEC now punishes some blockchain companies for holding unregistered ICO funding rounds and not legally categorizing their tokens as securities. The cryptocurrency market deals with a bad hand as Bitcoin plunges to lower prices and at the moment, further regulatory pressure would not paint a bullish chart for the sector.
An illegal Initial Coin Offering (ICO) funding round run by crypto startup Blockchain of Things Inc. (BCOT) reached a settlement with the United States Securities and Exchange Commission under which the company would be punished for violating securities laws. According to a press release shared on Wednesday by the SEC, the agency announced that they ordered the company to ‘cease and desist from committing any violation of the registration provisions of the federal securities laws.’
While the company is due to pay a $250,000 penalty, BCOT raised a stunning $13 million in funds after conducting an unregistered ICO. The ICO in question had the goal of establishing a blockchain platform which would enable developers to create applications for generating digital assets, transferring digital assets, and message transmission.
However, the raised funds are to be returned to the investors who bought the ICO tokens, as ordered by the SEC. Moreover, the investors will have to manually create a request and it remains to be seen whether all of them will make the decision. At the time of writing, BCOT tokens are not to be found on any major exchange.
The U.S. SEC also requested that the blockchain company registers its new tokens as securities, which must be done according to the Securities Exchange Act of 1934. Periodic reports must also be filed to the agency. In previous submissions, the SEC found out that BCOT did not successfully register its ICO under the ongoing federal securities law and that it did not reach a status for being exempted from the registration requirements either.
Commenting on the issue, the Associate Director of the SEC’s Division of Enforcement Carolyn M. Welshhans stated: “BCOT did not provide ICO investors with the information they were entitled to receive in connection with a securities offering. We will continue to consider appropriate remedies, such as those in today’s order, to provide investors with compensation and required information and to provide companies who conducted unregistered offerings with an opportunity to move forward in compliance with the federal securities laws.”