Illegal ICO Tierion to pay investors $25M plus interest in SEC settlement

Getting your Trinity Audio player ready...

The U.S. Securities and Exchange Commission (SEC) has reached a settlement with yet another Ethereum-based token issuer. Terion, a startup that claimed to offer data verification on the blockchain, will have to pay back over $25 million it raised in its ICO, plus interest and a $250,000 penalty to the securities regulator.

Terion launched its ICO in July 2017, selling 350 million Tierion Network Tokens (TNT) to 4,800 investors. It raised just above its target of $25 million. At the time of the ICO, the company was boasting of onboarding some large companies as clients, including tech giant Microsoft.

However, as per the SEC, Terion’s tokens were investment contracts under the Howey test. The regulator stated:

“A purchaser in the Token Sale would have had a reasonable expectation of obtaining a future profit based on Tierion’s statements that it would use the funds raised to continue to develop the Tierion Network.”

As part of the settlement, Tierion will permanently disable all TNT transfers by revising its code. It will also contact all trading platforms which have listed TNT tokens and request them to halt TNT trading immediately. It must further notify the wider public of the SEC Order and the consequent discontinuation of TNT transfers.

As per CoinMarketCap data, TNT tokens trade at $0.003098 at press time. They are down 99.1% from their all-time high of $0.3693 which they hit on January 2, 2018.

For the investors who purchased the TNT tokens during the ICO, the firm shall repay them “the USD value of the total TNT they purchased based on the price paid at the time of the token sale.” The company must also compensate all the investors who sold their TNT at a loss after participating in the token sale.

Tierion will also reimburse all investors who purchased TNT tokens in the secondary market, based on the price they paid at time of purchase. It, however, must not exceed the original token sale price of $0.072. Lastly, the company must compensate all public Tierion node operators, paying them $0.01 for each node they operate.

In addition, the company will have to pay a $250,000 in civil monetary penalty to the SEC.

Despite the huge setback, Tierion CEO Wayne Vaughan insists that his company will march on. In a blog post discussing the settlement, he said: “Developers can continue to use Chainpoint in their applications. Once the process outlined in the settlement is complete, we’ll move forward with the next stage of deploying the Chainpoint Network.”

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift and Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.