Yesterday, blockchain firm Block.one announced it settled a dispute regarding an initial coin offering (ICO) with the U.S. Securities and Exchange Commission (SEC). Under the settlement agreement, Block.one agreed to pay $24 million to the SEC. However, the recipient of the proceeds from the multi-billion EOS ICO did not admit or deny any infractions as per the SEC findings.
The settlement concerns an ERC-20 token sold via the Ethereum network between June 26, 2017, and June 1, 2018. The SEC stated that the token was not registered as a security before Block.one sold about 900 million units raising in the region of $4 billion, the largest ICO to date. It also said that Block.one continued to sell the token for nearly a year after SEC released the DAO Report of Investigation which clarified the SEC’s position that most ICO issuances are securities. Without an exemption from registration requirements, the ICO had come under the SEC scanner.
“A number of US investors participated in Block.one’s ICO,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement.
Avakian added, “Companies that offer or sell securities to US investors must comply with the securities laws, irrespective of the industry they operate in or the labels they place on the investment products they offer.”
Meanwhile, Block.one said the SEC granted it a waiver, so the company is not subject certain restrictions surrounding this sort of settlement. However, the company did not provide any further details.
“We are excited to resolve these discussions with the SEC and are committed to ongoing collaboration with regulators and policymakers as the world continues to develop more clarity around compliance frameworks for digital assets,” said Block.one in its announcement.
Block.one added that the concerned ERC-20 token is now out of circulation and will not be required to be registered as a security with the SEC. It no longer exists because Ethereum tokens were converted to native tokens on the EOS network.
Some think the $24 million payment is quite small at roughly 0.6 percent of the funds raised.
on a related note, a couple friends who built a platform a couple years ago went the equity route and struggled. tonight one of them said:
"I would have ICO'd in Washington DC if I'd known I could pay that little penalty."
— Tim Swanson (@ofnumbers) October 1, 2019
The SEC has previously cracked down on other ICOs. A few months ago, the SEC sued Kik Interactive for an alleged illegal $100 million ICO.
Update: We previously mis-stated the percentage of the funds raised.