Actions against initial coin offerings are back in the spotlight with the Securities and Exchange Commission and Massachusetts’ top securities regulator settling charges with Airfox for selling unregistered securities.
According to the SEC’s orders, both CarrierEQ Inc. (Airfox) and Paragon Coin Inc. conducted ICOs in 2017 after the commission warned that ICOs can be securities offerings in its DAO Report of Investigation.
The SEC states that the two companies sold digital tokens in ICOs.
The two cases mark the first time the SEC has imposed civil penalties solely for ICO securities offering registration violations.
Boston-based ICO issuer Airfox agreed to register its so-called “AirTokens” as a class of securities with the SEC and offer compensation to ICO purchasers.
AirFox also agreed to pay a $100,000 penalty to Massachusetts.
Airfox raised approximately $15 million worth of digital assets to finance its development of a token-denominated “ecosystem” starting with a mobile application that would allow users in emerging markets to earn tokens and exchange them for data by interacting with advertisements, according to the SEC.
“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,” said Stephanie Avakian, co-director of the SEC’s Enforcement Division, in a statement. “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.”