Business

Steve Kaaru

SEC settles with EOS parent company for $24M in penalties for unregistered ICO

The U.S. Securities and Exchanges Commission (SEC) has reached an agreement with Block.one which it had accused of conducting an unregistered initial coin offering. The firm will pay $24 million in civil penalty without admitting or denying the charges. Block.one is an EOS.IO software developer that the EOS Public Blockchain is built on.

In its press release, the regulator stated that Block.one conducted the ICO between June 2017 and June 2018. The ICO, which is the biggest to date, raised $4.1 billion. The company indicated at the time that it would use the money raised from the ICO to develop software and for promotional services. It would also use some of the funding for general expenses.

The press release indicated that Block.one didn’t register its ICO as a securities offering, nor did it seek an exemption from the registration requirements.

Stephanie Avakian, the co-director of the SEC’s Division of Enforcement stated, “A number of U.S. investors participated in Block.one’s ICO. Companies that offer or sell securities to U.S. investors must comply with the securities laws, irrespective of the industry they operate in or the labels they place on the investment products they offer.”

Block.one also failed to provide the investors in its ICO the information they were entitled to as participants in a security offering, Steven Peikin, the other co-director of the regulator’s Division of Enforcement remarked. Peikin also reiterated the regulator’s dedication to its mandate, stating, “The SEC remains committed to bringing enforcement cases when investors are deprived of material information they need to make informed investment decisions.”

For Block.one, the settlement is nothing more than a mere slap on the wrist. For a company that raised over $4 billion, the penalty amounts to 0.6% of the raised amount. In its statement, Block.one stated that it believes that the waiver by the SEC “evidences Block.one’s continuing commitment to compliance and best practices in the United States and globally.”

The company further stated that the settlement relates to the ERC-20 tokens that it sold on the Ethereum blockchain during the fundraising period. These tokens are reportedly no longer in circulation and as such, the company will not be required to register the token with the SEC.

Editor’s note: An earlier version of this article indicated that the penalty amounted to 0.006% of the ICO. This has been corrected to 0.6%.

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