Crypto Frontline

Unregistered ICOs continue to have a hard time in the United States, as the Securities and Exchange Commission continue to punish companies that have violated the Securities Law. On May 28^th, the blockchain services company BitClave PTD Ltd, headquartered in San Jose, California, had been charged for a $25 million ICO conducted between June – November 2017.

Recently we’ve seen how Telegram is struggling with regulatory issues, but smaller companies “benefit” from the same treatment. BitClave now must return all the funds raised to investors and pay additional monetary relief through a Fair Fund.

BitClave conducted unregistered securities offer

A press release published by the SEC on May 28^th points out that BitClave raised more than $25 million via the selling of Consumer Activity Tokens (CAT) to approximately 9,500 investors, some of them based in the US.  The company’s main goal was to use the funds for the development, administration, and marketing on a blockchain-based search platform for targeted consumer advertising.

However, BitClave emphasized it expected the token’s value would rise and made it available for trading on third-party platforms. Based on the order issued by the SEC, BitClave did not register the CAT sales, which were considered to be securities, and as a result, must face penalties:

The SEC’s order finds that BitClave violated the registration provisions of the federal securities laws.  Without admitting or denying the SEC’s findings, BitClave agreed to pay disgorgement of $25,500,000, prejudgment interest of $3,444,197, and a penalty of $400,000.  The order establishes a Fair Fund to return monies paid by BitClave to injured investors.

It seems like the SEC’s actions had made BitClave take steps back with regards to its operations. CAT tokens had been removed from most of the exchange platforms it was traded and the company does not want to develop or support the platform it wanted to build initially. Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit mentioned that “the remedies ordered by the Commission will provide meaningful relief to investors in this unregistered offering”.

This all means BitClave will be another on the list of unregistered ICOs which did not manage to bypass the US legislation for securities. As the charges and allegations continue to show, this is an additional motivation for blockchain-based startups to either register their activity or move their operations outside the US, where regulation is more friendly. Still, it’s important to note that regulatory compliance must be applied to the blockchain industry, as well, and it should not be treated differently.