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The U.S Securities and Exchanges Commission has charged yet another company with conducting an unregistered initial coin offering (ICO). In its press release, the SEC announced that Gladius Network LLC had self-reported to the commission. It would therefore not impose a penalty on the Washington-based startup.

Gladius is a cybersecurity company that aims at ending distributed denial of service (DDoS) attacks. Running on the Ethereum blockchain, it lets its users earn Gladius tokens for contributing their bandwidth, which it then uses to mitigate DDoS attacks. 

Gladius conducted its ICO in late 2017, raising $12.7 million. This was after the SEC had released a report warning that some ICOs constituted securities offerings and should therefore adhere to securities laws. Gladius didn’t register its ICO under the federal securities laws, the press release stated.

Recognizing its fault, the startup later self-reported to the SEC and expressed an interest in taking remedial steps. It was fully cooperative with the Jay Clayton-led commission during the investigation. Gladius agreed to compensate its investors and register its tokens as a class of security. For this reason, the SEC won’t impose a penalty. 

However, Gladius would only compensate those investors that request for a return of their funds. The firm also agreed to file its returns periodically with the SEC.

The SEC was adamant that it would continue to crack down on ICOs that it deems to be securities. Robert Cohen, the head of the commission’s Cyber Unit stated:

“The SEC has been clear that companies must comply with the securities laws when issuing digital tokens that are securities. Today’s case shows the benefit of self-reporting and taking proactive steps to remediate unregistered offerings.”

Gladius wasn’t the first ICO issuer to self-report to the SEC and compensate the investors. In November last year, two other crypto startups agreed to the same terms to avoid any punitive measures by the regulator. One of these was Paragon Coin, a startup that’s widely popular for dealing with the cannabis industry. The startup had raised $12 million in its ICO and agreed to compensate its investors, as well as register its tokens as securities.

The other was Airfox, a Boston-based startup whose ICO raised $15 million. Airfox is a crypto startup that targets emerging markets, allowing its users to earn, pay with and transfer tokens on its mobile application. 

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