On Monday evening, as many in the American crypto community were calling it a day, the U.S. Securities and Exchange Commission (SEC) made a jaw-dropping announcement.
Revealed in a press release published at around 7:00 pm EST, the American financial regulator revealed that it had “settled charges” against the creator of the EOS blockchain. Block.one, for “conducting an unregistered initial coin offering”.
This marks one of the biggest — if not the biggest — crypto-related enforcement actions from the SEC to date.
SEC Issues $24 Million Over EOS ICO
According to the press release published on Monday evening, Block.one has settled charges with the SEC “by paying a $24 million civil penalty.”
The blockchain giant, which operates in Blacksburg, Virginia, and Hong Kong, “consented to the order without admitting or denying its findings”, the SEC wrote.
For those unaware, the tension between the SEC and Block.one stems from the latter entity’s year-long sale of EOS tokens that raised some $4.1 billion — a record by a long shot for an ICO.
The SEC remarked in the release that “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”.
Steven Peikin, Co-Director of the SEC’s Division of Enforcement, argued that Block.One did not provide participants in the sale “the information they were entitled to as participants in a securities offering”.
He added that it is the SEC’s mission to clamp down on firms that deprived investors of material “they need to make investment decisions.”
While $24 million is obviously not a small sum of money, the sum of the settlement paid shocked crypto pundits. Nic Carter, a co-founder of Coinmetrics, noted that Block.one paid 60 basis points (0.6%) of the billions it raised in the sale — effectively nothing in the grand scheme of things.
Others echoed Carter’s concerns, drawing attention to what they claim is just a slap on the wrist, not an all-out enforcement event. Block.one, for instance, spent $30 million on a domain name earlier this year, making $24 million seem much like pocket change.
Despite these concerns over the severity (or lack thereof) of the settlement, it seems that with the $24 million fine, the case is done and dusted.
My mind is absolutely blown by this block one news.
The SEC looked into all the gory details and decided to settle for 60 bips of what b1 raised. WTF
— nic carter (@nic__carter) September 30, 2019
Block.one “Excited” to Resolve Matters
To the point and very blunt, the SEC release left much to be desired for, specifically in regards to a response from Block.one itself and the details of the settlement.
As such, the blockchain development firm came out with its own statements in a press release dated October 1st, 2019. In it, Block.one revealed that the settlement “relates specifically to the ERC-20 token sold on the Ethereum blockchain” during the ICO, not the new token that exists on EOS’s own chain.
It was also revealed that with this settlement, the SEC has granted Block.one “an important waiver” so that it will “not be subject to certain ongoing restrictions that would usually apply with settlements of this type”, cementing the idea that the settlement has resolved any current dispute between Block.one and the SEC.
Block.one concluded in the press statement:
“We are excited to resolve these discussions with the SEC and are committed to ongoing collaboration with regulators and policy makers as the world continues to develop more clarity around compliance frameworks for digital assets.”
More to Come…
While Block.one’s case is “one and done”, it may be that the SEC isn’t done with big names in crypto just yet.
Over the past few months, the American agency has been on an absolute killing spree against the crypto space, charging firms left and right for seeming wrongdoing. Earlier this year, it went after another high-profile case, bashing Canadian social media company Kik’s $100 million dollar ICO; just a few months back, it aimed to prevent the company behind once-massive altcoin Veritaseum from spending ICO proceedings.
The fact that the SEC went after Block.one, which ran the largest ICO ever, and other top companies in the cryptocurrency sector may be a sign of impending enforcement.