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Crypto Frontline

The US SEC Charged a Dallas Company for Unregistered ICO

The US SEC Charged a Dallas Company for Unregistered ICO

The US SEC Charged a Dallas Company for Unregistered ICO
August 30
07:12 2019

 

ICOs continue to be under the radar of the US Securities and Exchange Commission, as the agency continues to crack on companies that raised funding through unregistered ICO. A press release published on August 29th shows that the financial regulated reached a charge settlement with Bitqyck Inc. and its founders Bruce Bise and Sam Mendez.

Just recently we’ve written about how the SEC targeted an unregistered healthcare ICO and now we have another similar situation. This time, however, the company had been accused of defrauding investors with securities offerings of two digital assets (Bitqy and BitqyM), as well as operating an unregistered exchange platform.

$13 million raised and more than 13,000 investors involved

The SEC’s complaint alleges that both founders had misrepresented QyckDeals, a daily deals platform operating with one of their two tokens, and falsely claimed that Bitqy tokens actually offer fractional shares of Bitqyck stock via smart contracts.

Through the unregistered Bitqy and BitqyM ICOs, the company managed to raise around $13 million, with more than 13,000 investors contributing. Even though investors had been awarded $4.5 million in commission for referring new investors, they end up losing more than two-thirds of their investments.

A fake cryptocurrency mining facility

Investors had been told that the BitqyM tokens will generate returns via the company’s cryptocurrency mining facility, which was powered by below-market-rate electricity. The truth was that Bitqyck did not have any mining facility, nor access to cheap electricity.

David Peavler, Director of the SEC’s Fort Worth Regional Office, spoke on the case recently:

Because digital investment assets represent a new and exciting technology, they can be very alluring, especially if investors believe they are getting in on the ground floor and will own part of the operations… We allege that the defendants took advantage of investors’ appetite for these investments and fraudulently raised millions of dollars by lying about their business.

The company now has to pay disgorgement, prejudgment interest and a civil penalty of $8.37 million, with both founders having to pay separate penalties. This isn’t very good news for the ICO industry since it draws a dark shadow above all projects that raised funds in the past few years.

It seems like some of the ICOs had exploited the market hype and convinced people to invest in unrealistic projects, which never got implemented. This further fuels the need for an acceleration in regulatory procedures, given that legit companies with innovative projects, are facing a drop in trust.

Will global regulators finally step on the gas and come out with regulation for cryptocurrencies and it will be just an event that will be brushed by the market in the not-too-distant future?

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Significant losses can be seen across the board as this is news that leaves a bad mark on how cryptocurrencies could be used by people conducting illegal activity.
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The SEC’s chairman Jay Clayton, who had been very downbeat about Bitcoin ETFs recently, as well as four other SEC commissioners, are about to discuss cryptocurrency in the meeting that took place in September.

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