Coinme has been fined $4 million by the US Securities and Exchange Commission (SEC) for its initial coin offering (ICO) of UpToken. According to the SEC, the company’s offer of unregistered securities to cryptocurrency investors and traders was “misleading,” which is why a sanction was required.
According to the SEC’s ruling, the UPToken ICO by Coinme and its subsidiary qualifies as an investment contract. The Howey test was used to analyze the ICO, which was run between October and December 2017.
Since Coinme did not register the tokens as securities and did not meet the criteria for an exemption from registration requirements, the SEC recently stated that Coinme’s deceptive marketing strategy violated securities laws.
The SEC filing indicated that the company received around $3.6 million from the ICO, whereas the company planned to use the money to install more Bitcoin ATMs. Notably, the company used ICO funding to install 30 new ATMs.
Notably, CEO Neil Bergquist and subsidiary Up Global SEZC were also named in the SEC’s complaints. Coinme and Bergquist have been charged a total penalty of around $4 million and separate fines of $250,000 and $150,000, respectively. All penalties would be paid in full, and further violations of securities laws would not be tolerated.
As the SEC maintains the ideology that issuers of securities, digital or otherwise, should provide their customers with accurate information, the commission claimed that Coinme’s deceptive advertising left potential investors in the dark, unable to make educated investment decisions.
Significantly, the SEC has investigated unregistered securities offers and fraudulent initial coin offerings. In their latest action against Coinme, the SEC is dedicated to enforcing securities laws.
In 2017, the SEC created a team to investigate those who violate cyber security, particularly initial coin offerings (ICOs). Since then, the SEC has prosecuted numerous cases against individuals and companies for fraudulent ICOs. As a result, the SEC has issued warnings to investors regarding unregistered ICOs and has taken enforcement actions against businesses that have breached securities laws.
