Unikrn settles with SEC over its 2017 ICO

The U.S. Securities and Exchange Commission (SEC) recently announced a settlement with Seattle-based Unikrn Inc. over allegation it violated securities laws during the 2017 ICO craze.

During this crypto bubble powered by Ethereum, Unikrn raised $31 million by launching its ERC-20 UnikoinGold (UKG) digital currency with backing from several celebrity investors. Like many other high-profile projects, regulators concluded that the award-winning esports iGaming company failed to register the ICO offering or seek an exemption from investment contracts rules as stipulated by federal securities law.

Unikrn neither admitted nor denied the SEC’s findings, but reached a deal to pay $6.1 million to regulators to resolve the probe and continue operating. It also struck an undisclosed settlement with Washington State’s Department of Financial Institutions to resolve breaches of state registration provisions related to the token sale.

Once the SEC announcement went out, Unikrn CEO Rahul Sood posted via LinkedIn that they are “Happy to put this chapter behind us.” Sood added that, “Customers of UKG can be made whole, and we can focus on our future.”

For token holders, the SEC will distribute the penalty to Unikrn investors through a Fair Fund. It will oversee this process and provide further information later on regarding making a claim. 

Unikrn has also agreed to disable the UKG from its platform, publish a notice of the order, and request removal of UKG from all crypto exchanges

Not every member of the SEC team deemed that a violation had occurred, nor did the group accuse Unikrn of any fraud. Unikrn maintains it was operating within the laws at the time and has been openly working with regulators to clarify legal grey areas in light of the lack of regulatory guidance.

Notably, SEC Commissioner Hester M. Peirce did not concur in her colleagues’ opinion that Unikrn’s token offering formed a security offering. Peirce issued the following dissenting statement regarding the commission’s actions:

While many SEC enforcement actions in this space include allegations of fraud, Unikrn falls within the narrower category of token issuers charged only with violating Section 5 of the Securities Act. In other words, Unikrn is alleged to have offered and sold its tokens in an unregistered offering, and in a manner that did not qualify for an exemption; it is not alleged to have engaged in any fraud in doing so.

Peirce further states that the SEC should strive to avoid enforcement actions and sanctions that weaken innovation and stifle the business growth because of its ramification. This risk is even more evident with novel forms of business and new technologies.

The commissioner recommends a more sensible approach to these types of situations by creating a “regulatory safe harbor” where startups like Unikrn can “further develop and refine its platform” while still being subjected to antifraud laws and SEC oversight to protect investors. 

Sood took to social media to thank Peirce for her support. He vows that the company will continue innovating on payments and the blockchain.

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.