This month, the United States Securities and Exchange Commission (SEC) announced that it had achieved a settlement with the startup Blockchain of Things Inc – BCOT. As part of the settlement, the firm agreed to a number of stipulations including a penalty payment of $250,000 for conducting an unregistered initial coin offering (ICO). The news follows a string of SEC targeted ICOs from 2017.
News of the settlement first emerged on Dec. 18 via an SEC press release. In the release, the SEC explained the decision to settle with the New York-based firm. Additionally, the post explained the stipulations in more detail. For example, BCOT must cease and desist from any actions that can be deemed outside the current securities laws.
As part of the settlement, BCOT must return the $13 million in raised funds to investors that request a refund. Sadly, this could be a hefty request as the firm's tokens are not on any exchanges currently. Additionally, the firm will need to document and catalog these investors to file periodic reports with the Commission.
Speaking on the enforcement actions, Associate Director of the SEC’s Division of Enforcement, Carolyn M. Welshhans explained that BCOT failed to register its ICO in accordance with federal securities laws. Also, the company didn’t qualify for an exemption from the necessary registration requirements.
Welshhans stated that the SEC carefully considered the appropriate punishments to remedy the situation. In the end, the determination was made that BCOT would provide investors with compensation and required information if requested. Importantly, the SEC decided that the firm could host more offerings in the future, but would need to do so in complete compliance.
Also, the SEC requires BCOT to cease and desist from committing any violation of the registration provisions of the federal securities laws. Plus, the firm agreed to pay a $250,000 penalty for its actions. Importantly, BCOT assumed these fines without the need to admit guilt to the findings.
The BCOT ICO
BCOT raised $13 million during its 2017 unregistered ICO. The funding was to go towards the development and implement a blockchain-based platform for Dapps. The platform is specifically designed for third-party developers to build applications on. Currently, the platform has projects underway that included message transmission, digital asset generation, and digital asset transfer.
While the SEC crackdown appears to be in full swing, there is another trend that emerged recently. As of lately, firms ordered to repay investors have been closing their doors or skipping deadlines prior to the repayment. Already this month, multiple SEC charged firms choose to shut down operations rather than refund investors. Hopefully, BCOT doesn’t attempt the same strategy that sadly, leaves investors in the dirt. To date, the company called the SEC decision as “favorable.”
Hard Decisions Ahead
Moving forward the BCOT team has some hard decisions to make. Considering that their token isn’t on any exchanges, there is a very good chance you can expect a landslide of investors requesting refunds. Will BCOT have the funds to cover these requests? Only time will tell.