The US SEC has settled charges against the operator of Coinschedule.com, a popular website that ranked initial coin offerings (ICO), for presenting sponsored ICO rankings to investors without telling them the truth.
According to an SEC release on Wednesday, July 14th, Coinschedule.com violated the anti-touting provisions of the federal securities laws by failing to disclose the compensation it received from issuers of the digital asset securities it profiled.
An SEC order states that Coinschedule owned and operated a once-popular website platform that publicized current and upcoming offerings for different digital tokens and was accessible in the United States from 2016 to August 2019. The US visitors comprised a significant portion of its web traffic.
The website ranked Initial Coin Offerings (ICOs) in so-called listing profiles that contained links to token issuers’ websites and a trust score that Coinschedule claimed was based on its own “evaluation of the “credibility” and “operational risk” for each digital token offering based on a “proprietary algorithm.”
In reality, these rankings were sponsored and token issuers paid Coinschedule to profile their token offerings on the website. But it was never disclosed to the potential investors. Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, said:
“As the SEC’s order finds, Coinschedule presented potential investors with seemingly independent profiles about token offerings when in fact they were bought and paid for by token issuers. The securities law prohibiting touting securities for compensation without appropriate disclosures to investors is clear and longstanding.”
SEC further said that the Coinschedule published many ICOs after SEC issued its DAO Report in 2017 that warned that tokens sold in ICO might be securities and issuers should comply with the federal securities laws. At that same time, SEC’s Division of Enforcement and Division of Examinations also issued advice that platforms promoting “a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion.”
SEC has asked Blotics Ltd., the successor operator of the website to Coinschedule, to pay $43,000 in disgorgement, plus prejudgment interest, and a penalty of $154,434. Without admitting and denying the SEC’s findings, Blotics has agreed to pay the fines, cease, and desist from committing or causing any future violations of the anti-touting provisions of the federal securities laws.
Since the ICO bubble of 2017, US SEC has busy fighting the fraudulent token offerings that happened at that time. The most famous legal fight was between US SEC and Telegram that resulted in the shutdown of Telegram’s blockchain project TON and its GRAM tokens.
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