Business

Derek Tonin

Bitstocks’ CryptoTime discusses ICO fines and scandals

It’s been a couple of weeks since Block.one was fined by the U.S. Securities and Exchange Commission (SEC) for conducting an unregistered Initial Coin Offering (ICO). That’s given the blockchain and cryptocurrency industry plenty of time to analyze the potential impact the fine would have, and if it’s enough.

Block.One, the EOS developer, had raised $4.1 billion in an unregistered securities offering, the SEC had determined. The SEC also determined they failed to provide investors with all the information a security offering would require. As a result, they negotiated a penalty of $24 million with the regulator, while avoiding any circumstance where they would have to admit fault.

In Episode 27 of CryptoTime, Bitstocks shortform crypto podcast, Antonio Shillingford spoke with Investment Associate Stephen Ierotheou about the fine, as well as other shenanigans in the ICO sphere. Ierotheou wasn’t impressed with the EOS offering from the start. “Considering at the time it was just a whitepaper, it was just an idea or a proposal or pitch,” he said. “There had been zero development work done, so it raised a lot of money considering it was just an idea, almost like a seed investment.”

The more worrying aspect might be the paltry sum the SEC fined the developer. Ierotheou expands:

If you look at 24 million relative to the actual amount Block.one raised, it’s so minute, and in my opinion, it simply sends out the wrong message. You’re fining a company not even a fraction of what they raised, so it’s almost like not even a slap on the wrist and it just allows companies like EOS, Block.one, to pursue development work without really facing the consequences of what they’ve actually done.

They also noted that using other cases, it appears the amount raised by the ICO had no bearing on how much the SEC fined Block.one. Siacoin was fined $250,000, Shillingford noted, which was really a punishment as this was more than they brought in from fund raising. They speculated that the fines are lilely more tied to the method of the infraction rather than the amount of funds brought in.

But the EOS ICO is still alarming, and they worry that the $24 million fine is just a slap on the wrist for the company. Ierotheou noted that with the fundraising brought in with a year-long ICO was worrying, with daily adjustments to the ICO price, as it caused a “massive increase in the price of value, which is completely unjustified.”

Ierotheou closed the discussion with a word of warning to ICO investors, from a statistic he had recently found. “The vast majority of ICOs have yet to write 4 lines of code one year after launching their ICO… Yet they’re raising hundreds of millions of dollars,” he recited. Considering the industry has gained a reputation as more hype than substance, it’s an important figure to keep in mind.

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