We’re at it again with initial coin offerings (ICOs). This time, however, the problem doesn’t stem from phony or fraudulent systems, but rather from ignoring the registration process and failing to file the proper paperwork.
The Securities and Exchange Commission (SEC) has enforced certain regulatory steps for companies looking to issue or establish initial coin offerings. These steps are designed to not only legitimize the companies in question but protect the customers who take part in the events. Keeping their identities, monetary assets and relative data safe and protected is said to be the SEC’s primary goal.
So, when someone doesn’t play by the law, they’re not only hurting themselves; they’re potentially hurting the participants. The SEC has long proclaimed that it will crack down on cryptocurrency-related ventures that seek to avoid present standards and regulations, and it looks like they’re getting the ball rolling with a case against Paragon Coin and Carrier EQ – two companies whom the SEC is ordering to pay back their investors.
What Did You Guys Do?
According to regulatory officials, neither company appropriately registered their ICOs with the SEC. Thus, both enterprises are being told that they must offer money back to their investors and pay approximately $250,000 (each) in fines. Furthermore, both companies will be required to file financial statements and other documents that give investors stronger ideas regarding the health of their businesses.
They will also be required to register with the SEC if they’re planning to continue doing business in the future. This is the first case of its kind against any such cryptocurrency-based company.
In a statement, co-director of the SEC’s enforcement division Stephanie Avakian explained:
“We have made it clear that companies that issue securities through ICOs are required to comply with existing statutes and rules governing the registration of securities. These cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets.”
So, How Much Money Did Everyone Get?
Paragon raised approximately $12 million in August 2017 through its ICO. The company uses blockchain technology to manage chain tracking for the cannabis space. Carrier EQ – also known as AirFox – provides financial services in emerging markets and raised approximately $15 million in an October 2017 ICO.
The firms are not being accused of fraud, and their fundraising efforts appear legit for the most part, though executives are not denying any of the SEC’s present accusations. The governing body says that the tokens being offered should have been registered as securities, aka investments that will grant investors positive returns should the ICOs become successful.
Always Look on the Bright Side of Life
Chief executive of Paragon Jessica VerSteeg says that representatives have been working diligently regarding its newfound agreement with the SEC to “effectively put an end to the uncertainties of the legal status of our PRG tokens.” She further stated that the company has entered partnerships with several marijuana companies including Fundanna, Dreamfields, Oakland Distribution, Flux, Mammoth Labs and Pearl Pharma. The company has recently launched the first phase of its new mobile app, which will allow for both a PRG wallet and a Paragon Space member portal.
Carrier EQ CEO Victor Santos has explained that the company is happy with the settlement terms it reached with both the SEC and the Massachusetts Security Division. Through the newfound agreements, he believes that the company is “removing uncertainty” and positioning the company to grow its “blockchain platform within a regulatory framework.”