In another example of the SEC turning up the heat on firms, the regulatory body hit Veritaseum and its CEO with hefty fines. Veritaseum had been embroiled in an SEC trial since earlier in the year. The SEC alleged the firm illegally sold securities to investors. Now the company must pay $8 million in fines and judgments as part of its retribution.
As previously reported, Veritaseum LLC, its CEO Reggie Middleton, and a sister firm, registered in NY, Veritaseum Inc. faced serious scrutiny from the SEC for its 2017 – 2018 ICO. During the unregistered coin offering, the firm secured $14.8 million in funding from investors.
By mid-2018, the SEC received numerous complaints of fraudulent activity on the part of Mr. Middleton. For example, the SEC report alleged Middleton downplayed the risks involved in the investment. Additionally, he misrepresented the tokens his company offered.
Tokens are not Coupons
On multiple occasions, he referred to the tokens as securities or software. The report states that at least on one occasion, he told investors the tokens were similar to gift cards.
On top of the troubling miss information campaign, Veritaseum had other shady incidents occur during its now controversial ICO. According to Middleton, the company was the victim of a hacker that stole $8 million from funds raised. Of course, these funds were never recovered. Consequently, the incident added to the black cloud accumulating over the Veritaseum camp.
In August of this year, the SEC responded to investor complaints. The regulatory body sent Middleton a cease-and-desist. As part of the complaint, Middleton’s ability to host an ICO or operate his firms was put on freeze.
SEC Enters Talks
The SEC entered official settlement talks with Veritaseum on OCT 9. This decision followed a postponement of the original trial date until Nov. 14, 2019, by the New York Eastern District Court.
According to reports, Veritaseum must now pay $8.4 million in disgorgement fines. Of these fines, $7,891,600.00 goes to defendant liabilities. Additionally, the company is liable for a civil penalty of up to $1 million and a prejudgment interest amount of $582,535.
Veritaseum Hit Hard
The news hit Veritaseum’s market value hard. Since the start of the trial, Veritaseum lost around 35% of its value. The token fell from around $25 per coin to $15, before rebounding slightly to $18.71.
SEC on the War Path
The SEC has been on a mission to crack down on ICOs from the 2017 crypto craze. Regulators already hit Sia with a $225,000 for its 2017 ICO in which the firm raised $120,000. EOS is another example of the SEC crackdown. The company must pay $24 million for its $4.1 billion 2017 ICO. While both firms faced charges for illegally selling securities, neither had such significant misrepresentation claims put against them as Veritaseum.
Veritaseum is Unique
In this manner, Veritaseum is significant. The firm is still operating but Middleton is no longer able to conduct blockchain crowdfunding ventures. It’s hard to say exactly what the long term effects of the settlement will be. For now, the crypto community must watch and wait patiently to see the results.
Propine Accepted into MAS FinTech Sandbox
It was recently announced that Propine has been accepted into the Monetary Authority of Singapore’s FinTech Sandbox.
This move sees Propine join iSTOX as a participant within the sandbox. While the iSTOX is working towards serving capital markets, Propine will be testing their custodial capabilities within the program.
Over time, Propine indicates that their goal is to develop a comprehensive suite of services, tailor built for the digital securities sector. The following are a few the capabilities expected to be offered through the platform.
- Asset Servicing
- Trade Settlement
A ‘FinTech Sandbox’ typically refers to a structured program, built to allow for the testing of new technologies and approaches towards the industry. The purpose of such programs is to allow for innovation to flourish, while ensuring that the public retains high levels of protection at all times.
Tuhina Singh, the Chief Executive Officer and Co-founder of Propine, commented on acceptance into MAS’s Fintech Sandbox:
“We are extremely glad that we are going to be a part of the Fintech sandbox. Singapore is one of the most progressive economies in terms of support and in providing a platform for innovative solutions such as ours to experiment, build and thrive. The regulatory sandbox is a great step for us as we move into a more organized and regulated world for blockchain. A supportive initiative like this will propel the country’s rich history of innovation to much greater heights along with growing companies such as ours”
Founded in 2018, Propine is a Singaporean company, which operates within the digital securities sector. Building off of a specialty in custody services, Propine is actively developing a comprehensive suite of services surrounding digital securities.
CEO, Tuhina Singh, currently oversees company operations.
The Monetary Authority of Singapore is a regulatory body which wears multiple hats. Their roles include acting as, not only the nation’s central bank, but as the financial sectors regulator.
These roles mean that the MAS is responsible for, not only the economic growth of Singapore, but for ensuring the protection of investors through compliance measures enforced within banking, insurance, capital markets, and more.
In Other News
Over the past two years, Singapore has managed to establish themselves as a leader within digital securities. They have managed to do so through the use of programs such as the FinTech Sandbox described here today. The following articles are examples of forward thinking steps involving Singapore and the MAS.
Blockstation Joins the IIROC
The tokenization platform, Blockstation announced on Oct 31, that it will accept a leadership role in the Investment Industry Regulatory Organization of Canada – IIROC. The news showcases a push for more regulations in the Canadian security token sector, as well as, stronger positioning of Blockstation in the market.
The IIROC is a Canadian self-regulatory body created to help further development in the security token sector. The group’s primary focuses include broker-dealers, trading, and the institution of Universal Market Integrity Rules (UMIR).
The IIROC includes a huge variety of professionals from various parts of the industry. As such, the group provides a rare opportunity for regulators to collaborate with leading financial, legal, and technological institutions across Canada.
Currently, the group includes regulators, crypto firms, law firms, and three of the largest banks in the country. Specifically, the Crypto-Asset Working Group members are:
- Stephen Allcock (Questrade Financial Group)
- Pam Draper (Bitvo)
- Robin Ford (Robin Ford Consulting)
- Andrew Grovestine (Canadian Securities Exchange)
- François Lavallée (National Bank Financial)
- Julie Mansi (Borden Ladner Gervais LLP)
- Felix Mazer (Coinsquare)
- Linda Montgomery (Coinchange Financial/Blockstation)
- Brian Mosoff (Ether Capital Corp.)
- Souvik Mukherjee (Scotia Wealth Management)
- Laurence Rose (Omega Securities Inc./ 4C Clearing Corporation)
- Duncan Rule (CIBC)
- Phil Sham (Aquanow)
- Sean Shore (Canadian Compliance & Regulatory Law)
- Paul Stapleton (Fidelity Clearing Canada)
- Dino Verbrugge (DV Trading LLC)
- Joseph Weinberg (Paycase Financial)
- Robert Whitaker (Blockchain Intelligence Group)
- Lara Wojahn (Dominion Bitcoin Mining Company Ltd.)
One of the main goals of IIROC is to develop a regulatory framework that supports a robust, thriving digital asset marketplace to further drive innovation in the space. Additionally, the body seeks to integrate more consumer and investor protections in the market.
Blockstation Joins the Team
Blockstation received an invitation to participate in the IIROC after the group recognized the firm as an industry leader in the region. Importantly, Blockstation has experience working with regulators in other jurisdictions to develop its platform.
Today, Blockstation operates a fully compliant tokenization platform. The services provided by the firm include an end-to-end solution for listing, tokenizing, trading, custodianship, clearing and settlement, and lifecycle management of tokenized assets. Specifically, the firm’s Marketing Advisor Linda Montgomery will lend her experience to the IIROC.
Blockstation Makes Headlines
Notably, Blockstation made headlines this week after the announcement that the firm will host a compliant digital securities ecosystem via the Jamaica Stock Exchange (JSE). This limited pilot will test the trading of Bitcoin (BTC) and Ethereum (ETH) according to an April 3, press release.
Jamaica Stock Exchange
The JSE first announced its crypto aspirations back in August. At that time, the JSE signed a master agreement with Blockstation. For its part, Blockstation would develop the tools for the trading of digital assets and security tokens on the JSE.
Blockstation Making Waves
Blockstation is a true pioneer in the Canadian crypto space. Now the firm seeks to help develop the fledgling STO sector into a major FinTech market. You can expect to hear more from these exciting developers as their JSE project continues. For now, Canada looks to be ready to take the next steps in blockchain adoption.
Harbor Approved by SEC as Transfer Agent
Harbor, a tokenization platform, has recently announced that they have successfully been awarded a ‘transfer agent’ licence by the Securities and Exchange Commission.
This new role will allow Harbor to act as a regulated financial bookkeeper. More specifically, this role “…involves recording transactional data, including asset ownership, and more. Transfer Agents are typically utilized by companies which have issued some form of security.”
This development caps off a productive few months, which also saw Harbor become a registered broker/dealer.
With these two new designations bestowed upon them, the company gains a significant amount of flexibility in the services which they can offer clientele. In a nascent industry, in which most companies are battling to establish themselves, this flexibility should prove to be a major boon to Harbor.
Harbor CEO, Josh Stein, commented on the need of companies within the digital securities sector, and how Harbor is doing their part to help them.
“…companies need solutions to compliantly manage the investment lifecycle, which includes working with licensed broker-dealers and registered transfer agents…Harbor provides these services along with a common technology platform that integrates compliance and custody and enables the traditional private capital ecosystem of issuers, broker-dealers and placement agents.”
While there may be various reasons as to why Harbor applied to become a transfer agent, the ability to offer Reg A+ investment opportunities ranks at the top of their list.
Harbor CEO, Josh Stein, had the following to say on the importance of this type of structuring.
“Reg. A is really a sweet spot for many companies looking to raise capital, including blockchain companies wanting to get their tokens into the hands of a broad user base and offer potential for liquidity from day one.”
Investment opportunities operating under Reg. A+ are unique in their flexibility, as they are open to, not only accredited, but retail investors alike. Furthermore, they allow for a company to raise as much as $50M in a capital generation event. The main caveat is that a transfer agent is required to oversee the process in order to remain compliant – a title that Harbor now holds.
A United States based company, Harbor, specializes as a tokenization platform. The company, which was founded in 2017, currently sees its operations spearheaded by CEO, Josh Stein.
In the time since their launch, Harbor has contributed more than most, to the digital securities sector. A few of these contributions include, not only the development of a specialized token standard for digital securities (R-Token), but the facilitating the tokenization of large real estate funds.
In Other News
For those interested in learning about industry competitors holding similar licensing to Harbor, make sure to read the following article. Here, we briefly discuss, not only the roles associated with these titles, but companies which hold them.