Company to pay millions in penalty for unregistered initial coin offering
The Securities and Exchange Commission announced settled charges against blockchain technology company Block.one for conducting an unregistered initial coin offering of digital tokens (ICO) that raised the equivalent of several billion dollars over approximately one year. The company agreed to settle the charges by paying a $24 million civil penalty.
According to the SEC’s order, Block.one, which has operations in Virginia and Hong Kong, conducted an ICO between June 2017 and June 2018. The order finds that Block.one stated it would use the capital raised in the ICO for general expenses, and also to develop software and promote blockchains based on that software. Block.one’s offer and sale of 900 million tokens began shortly before the SEC released the DAO Report of Investigation and continued for nearly a year after the report’s publication, eventually raising several billion dollars worth of digital assets globally, including a portion from US investors. Block.one did not register its ICO as a securities offering pursuant to the federal securities laws, nor did it qualify for or seek an exemption from the registration requirements.
“A number of US investors participated in Block.one’s ICO,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement. “Companies that offer or sell securities to US investors must comply with the securities laws, irrespective of the industry they operate in or the labels they place on the investment products they offer.”
“Block.one did not provide ICO investors the information they were entitled to as participants in a securities offering,” said Steven Peikin, Co-Director of the SEC’s Division of Enforcement. “The SEC remains committed to bringing enforcement cases when investors are deprived of material information they need to make informed investment decisions.”
The SEC’s order finds that Block.one violated the registration provisions of the federal securities laws and requires it to pay a $24 million civil monetary penalty. Block.one consented to the order without admitting or denying its findings.
The investigation was conducted by Luke M. Fitzgerald and Tuongvy Le, and was supervised by John O. Enright, of the SEC’s Cyber Unit and New York Regional Office.