The United States Securities and Exchange Commission (SEC) issued an order which forces the cryptocurrency startup BitClave to return the $25.5 million to its ICO investors.
The charges against the cryptocurrency firm were issued on March 28th by the financial regulator. BitClave was allegedly responsible for selling unregistered securities in its initial coin offering.
“Issuers of securities, traditional or digital, must comply with the registration requirements of the federal securities laws. […] The remedies ordered by the Commission will provide meaningful relief to investors in this unregistered offering,”- stated the Chief of the SEC Enforcement Division’s Cyber Unit Kristina Littman.
The SEC went on to elaborate: “BitClave agreed to settle the charges by returning proceeds from the offering and paying additional monetary relief to be distributed to investors through a Fair Fund.”
The California-based startup conceded to repay $25,500,000 of its ICO gains, prejudgment interest of $3,444,197, and $400,000 in penalties, but without acknowledging or repudiating the accusations brought by the regulator.
BitClave revealed back in October 2017 that it intended on giving rewards to internet users that allowed them to use their data for advertisement targeting. Further claims of the company stated that its system could help reduce the costs of online advertisement as it cuts out the third-party intermediary.
At the end of November 2017, the ICO hit its hard cap of $25.5 million in just 32 seconds by selling Consumer Activity Tokens (CAT) to nearly 9,500 investors, some of which were from the US. The SEC deemed that the sale of BitClave’s tokens was an unregistered security offering.
BitClave was also accused by the regulator that their marketing tactics deceived investors to expect a price increase in the CAT token:
“BitClave planned to use the ICO proceeds to develop, administer, and market a blockchain-based search platform for targeted consumer advertising. BitClave emphasized its expectation that the tokens would increase in value, and took steps to make the tokens available for trading on third-party digital asset trading platforms after the ICO.”
BitClave will also start removing from crypto exchanges its Ethereum-based CAT tokens. On CoinMarketCap data, the token experienced an increase of 23.6% in the last 24-hour period and is, at the moment, only supported on the YoBit crypto exchange (CAT/BTC and CAT/USD). All the tokens that remain in the company’s possession will be permanently disabled.
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