Right from the beginning of this year, the US Securities Exchange Commission (SEC) is in news for a legal battle against Telegram Massager for unregistered ICO sales. Here’s it’s another wrangle with the ICO startup ICOBox. In it’s another move for regulating hostility towards the crypto assets, The US Securities and Exchange Commission has penalized another ICO firm ICOBox and its founder Nikolay Evdokimov with a hefty fine of $16 million.

Charges Levied by the SEC
SEC booked this firm and its founder Nikolay Evdokimov back in September 2019, for illegitimate sale of unregistered ICO tokens to more than 2000 investors raising $14 million. The firm also permitted the sale of another $560 million tokens via its platform for which it has been charged offender for unregistered brokership.
SEC has furnished the documents in the California Central District Court January 10, claiming that the ICOBox along with the founder is equally accountable for the fines for disgorgement and prejudgment interests of $1,459,428.99. It has further asked to impose a default judgment against the company.
Regional Director of SEC, Michele Wein Layne commented, “By ignoring the registration requirement of the federal securities laws, ICOBox and Evdokimov exposed investors to investments, which are now virtually worthless.”

Previous Enforcements of SEC
In 2017, the SEC had issued a warning to the ICO projects that it will treat ICOs as unregistered securities. During the 2018-19 period, most of the ICO ventures which mushroomed in hundreds of numbers were not legally compliant. So most of them had to face the wrath of the SEC enforcement Act and were penalized in millions. Some of them had to return the investment money to the speculators apart from the hefty fines. Through the enforcement activity, SEC collected $3.789 billion in 2017 and in 2018, it levied $3.945 billion fines to the firms. Whereas in 2019, it collected $4.3 billion through fines and disgorgements. Interestingly most of the penalized firms were the ICO ventures. In November 2018, SEC had fined Airfox and Paragon for violations of the security registration process. Another cyber security startup Gladius Network had been enforced to refund $ 12.7 million to the investors as a settlement for violating the law.
However, Gladius and two other ICO ventures dissolved their firms abruptly and chose to overlook the funds of the investors leaving the investors in the lurch. Some of the ICO project startups have been following misconducts in tokenization and don’t even fulfil the technical requirements and mislead their investors including the ICOBox.  

SEC’s Stern Approach towards ICOs
Over the past year, SEC has been acting sternly towards the regulations of crypto asset companies especially against the unregulated security tokens. Apart from its ongoing legal battle with Telegram Messenger and several other crypto firms, this is another ICO regulatory action against an ICO venture. The SEC has been proactive in the last couple of years penalizing several unregulated ICO firms with millions of fines. However in December 2019, in a public statement, SEC Chairman Jay Clayton insisted that ICOs are effective for entrepreneurs to raise capital and that the blockchain startups should definitely explore the public fundraising model through ICOs. SEC’s priority is to protect the interest of investors and stakeholders so it publically appeals to the crypto firms to register the ICOs to avoid the legal brawl. In 2020, the SEC intends to continue to enforce action against the ICO culprits. But as there is still a grey area in the regulatory law, the US legislators’ aims to frame more clarity regarding the federal role and duties of SEC and Commodity Future Trading Commission (CFTC) for effectual crypto enforcement.  

Growing Demand for building the Regulatory Compliance Programs
Owing to the rising risks of frauds, scams and misconduct, a space for effective Regulatory Compliance programs has been growing to protect the investors’ money. The compliance program is an effective solution to prevent fraud by tracing and responding to fraudulent activities. To meet the demand, Many FinTech firms including the CryptoAssetRating (CAR) are in the process to launch Regulatory Compliance programs for assessing the fraud risks in the new projects.

More about ICOBox
ICOBox is a service provider in the ICO crowd sales bracket which provides assistance to sell their crypto products. It has been founded by Anar Babaev, Daria Generalova, and Nick Evdokimov. 

#Crowdfunding #Cryptocurrency #Blockchain #Startup #CryptoCompliance #SEC #Regulation #COs       #ICOBox #cryptoassetrating #Tokenization

Jayashree Ingle

CBW - External Analyst

INDIA