SEC Imposed $16 Million Penalty to ICOBox for Unregistered ICO Token Sale


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