SEC Cracks Down on Touting of ICO’s, Fining Coinschedule $200,000

Another edict from the SEC cracks down on crypto, but there is some debate as to how the commission is defining their regulatory actions.

By
Kyle Heise
on
July 17, 2021
Category:
Blockchain News

Violation of Anti-Touting Laws

The United States Securities and Exchange Commission (SEC) agreed to charges against the company Blotics Ltd. The SEC has settled the charges against the operator of Coinschedule.com for violating anti-touting laws between 2016-2019. The United Kingdom-based company received undisclosed compensation for initial coin offering listings which is in direct violation of the anti-touting law in Section 17(b) of the Securities Act. 


The SEC found that Coinschedule presented their visitors with false indications of trust scores for the Initial Coin Offerings (ICOs) on their site based on a proprietary algorithm. These trust scores supposedly increased the credibility of coins to the visitors of the site. However, these scores were in fact not based on data metrics - Coinschedule was applying scores based on compensation from the listed tokens.


Official Report Claims Clarity With Laws

In the official report  published July 14 from the SEC, Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, was quoted saying that ​​”Coinschedule presented potential investors with seemingly independent profiles about token offerings when in fact they were bought and paid for by token issuers.” 

Blotics did not admit or deny any of the charges and acquiesced to the fines. The SEC ordered nearly $200,000 USD in penalties. The company has to pay $43,000 in disgorgement, including prejudgment interest, and plus a fine of $154,434. 


In 2017, SEC’s Division of Enforcement and Division of Examinations issued a warning to all ICOs that they must comply with federal securities laws.

Littman also indicated the clarity of the law: “The securities law prohibiting touting securities for compensation without appropriate disclosures to investors is clear and longstanding.”  

The SEC has taken an increasingly strong stance as of late against all cryptocurrencies and their affiliates. The anti-touting provisions of the federal securities laws affirm that anyone who promotes a virtual token or coin must disclose all compensation in relation to the promotion of the token or coin. 


Piecemeal Enforcement Is Not Enough

However, two other SEC commissioners, Elad Roisman and Hester Peirce issued a joint statement in stark contrast to what they called “a decided lack of clarity” in the initial report surrounding the application of the securities laws towards digital assets from the regulatory body. The two commissioners were baffled at the omission to indicate which of the assets listed on Coinschedule were subject to the security laws. 

The decision is not new to the industry as the regulatory body continues to lack clarity in its edicts. As long as the SEC continues to provide regulation in the form of piecemeal enforcement actions there will continue to be gray areas in the industry. Both Peirce and Roisman have called on the SEC to engage more to create transparency. 

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Kyle Heise

Born and raised in the East Bay, and a fifth-generation San Franciscan. He has studied and worked on three continents and lived in eight countries. Kyle lives and works in San Francisco.

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