Bitqyck to Pay $10 Million-Large Fine
02 Sep 2019
Bitqyck to Pay $10 Million-Large Fine for Selling Two Unregistered Cryptocurrencies
The US regulator, the Securities and Exchange Commission (SEC), continues with its struggle against unregulated cryptocurrency projects. The regulator's latest move has seen settling charges against two entities — a company known as Bitqyck, Inc., and TradeBQ.com, an online deals platform which sold unregulated tokens in an ICO.
Bitqyck, the company which developed the tokens, was launched two years ago, in early 2017 by Samuel Mendez and Bruce Bise. Since then, the firm has created and sold two tokens — BitqyM and Bitqy. The tokens were offered to US investors without being registered with the regulators, which makes the offering — which managed to raise $13 million — illegal.
Not only that, but the SEC claims that the tokens that were offered could actually be securities, not unlike the majority of the coins issued in the last several years. While the crypto regulations are still lacking in the United States, that is not the case for securities, and the two needed to register with the regulator as broker-dealers in order to be compliant with the current laws.
Further, the SEC claims that the token sale operators managed to raise money from more than 13,000 investors, some of which received $4.5 million in total for referring new potential investors. However, along the way, they also lost around 65% of their investments in the firm.
BitqyM’s false promises and exaggerated claims
According to the claims made by BitqyM, the raised funds would be used for financing the development of the smart contract-oriented ecosystem where the tokens would provide ownership in a crypto mining facility. The facility would also supposedly be powered by electricity at the cost of a below-market rate.
However, there are problems with this, as well. Not only was neither of the two tokens registered, or even compliant with the security regulations, but it seems that the company also does not have access to cheap electricity. They also never owned a mining facility of any kind, which brings the majority of their claims into question.
As for the SEC itself, the regulator has decided to impose fiscal penalties, in addition to including undertakings that would compensate investors that were tricked into buying the two tokens during the illegal ICOs. The company, Bitqyck, was charged with paying $8.3 million, while the two founders also got their own penalties. Bise is required to pay $890,254, while Mendez's civil penalty includes $850,022.
ICOs still a danger, but the SEC might be seeing potential
The SEC's Fort Worth Regional Office's director, David Peavler, commented by saying that digital investment assets have become a rather exciting new technology, which can make them very alluring. Further, if the investors believe that they are getting in on a successful project early on and that there is a possibility of them owning a part of the operations, they might receive further incentive to participate in token sales.
Peavler continues by saying that the regulator believes that Bise and Mendez took advantage of the investors' desire to support the project and join something bigger. This allowed them to scam them out of millions of dollars and has also inspired them to lie about their business.
The SEC's move comes in continuation of the ICO crackdown which had started back in 2017/2018, after the crypto boom that allowed digital currencies to become a new trend around the world. Further, the regulator believes that the danger of fraudulent ICOs still remains, which is why they continue with their warnings to investors.
With that said, the regulator also started approving of some of the projects, such as Blockstack, which is in the process of creating a dApp platform. This is also the first startup that has applied to the regulator and got approval.
