September 20, 2019
The Securities and Exchange Commission (SEC) has laid complaints against ICOBox, a firm that provides initial coin offering (ICO) marketing services for crypto related firms, and its CEO Nikolay Evdokimov. According to the allegations from the SEC, ICOBox violated US securities laws during its ICO, which was conducted in 2017.
During its ICO, Evdokimov’s firm raised $14.6 million from over 2,000 investors in the US. The firm promised these investors that the tokens they bought during the ICO would increase in their value once the company began trading. These investors were told that they would also be able to purchase additional tokens on ICOBox’s platform at a discount through the use of the tokens they bought during the ICO. The ICOS tokens proved to be worthless later, and this is a violation of the laws that govern this kind of offering.
The SEC’s complaint states that Evdokimov told investors in his firm that funds raised from the sale of the ICOS tokens would be used to cover the firm’s costs for providing its marketing services to crypto startups that cannot afford them. ICOBox claimed that they would support over 100 clients a month which would make their tokens highly valuable. To date, the ICO marketing firm has failed to provide support for a token sale to completion.
The regulatory body is also taking action against ICOBox for its role in the ICOs of several other crypto related firms. The SEC alleges that ICOBox was involved in the sale of over $650 million worth of digital tokens for dozens of crypto firms. By participating in these token sales, ICOBox acted as a broker. The company is not registered as a brokerage firm, and hence, its role in those token sales is illegal.
The SEC, through its action against ICOBox, is seeking refunds with interest for investors who participated in the ICO. They are also pushing for civil penalties to be instituted, and for the company to suffer injunctive relief.
According to Michele Wein Layne, Regional office Director in the Los Angeles Regional Office, ICOBox ignored the registration laws that govern providers of securities. Evdokimov and ICOBox put investors at risk by offering them digital tokens which are now worthless. They also did not provide these investors with the necessary information needed for one to make informed investment decisions. The absence of this vital information is a violation of the SEC’s regulations.
The SEC has taken action against several firms for violating securities laws through their ICOs. The regulatory body has taken different measures such as placing a hold on the ICOs as they are being conducted, freezing the assets of the firms involved in the ICOs, or suspending trading on these platforms.
There is a lack of clarity regarding what kind of digital tokens can be classified as securities. Some tokens do not constitute securities while some, because of certain characteristics they carry, fall under securities according to the SEC’s regulations.
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