Blockchain of Things Inc. (BCOT) Charged by SEC for Unregistered ICO
Blockchain technology company Blockchain of Things Inc. (BCOT) settled charges brought against them by the Securities and Exchange Commission (SEC) on December 18, 2019, for conducting an unregistered initial coin offering (ICO). The New York-based startup Blockchain of Things conducted its ICO, in December of 2017, which was after the SEC had released its DAO Report Investigation, which reported that ICOs can in fact be securities offerings. This is the latest in the string of many cases that the SEC has been bringing against unregistered token offerings. As cryptoiq.co puts it, “Blockchain of Things (BCOT) is the latest ICO to get obliterated by the SEC.” The SEC has shown that it is serious about ensuring cryptocurrencies are not used as a runaround of United States securities laws.
During its ICO, Blockchain of Things raised almost $13 million in funds. As noted by the SEC, “BCOT explained that its platform was intended to allow third-party developers to build applications for message transmission and logging, digital asset generation, and digital asset transfer. The SEC’s order found that BCOT sold its digital tokens to U.S. investors and engaged four “resellers” to serve as the exclusive sellers of BCOT’s digital tokens in certain foreign countries without restrictions on resale of those tokens to U.S. investors. The order further found that BCOT did not register its ICO pursuant to the federal securities laws, nor did it qualify for an exemption from the registration requirements.”
As cryptoiq.co explains in their article, BCOT will have to return all funds to investors who submit claims and pay the SEC a $250,000 fine. Of course, most of the money that BCOT raised two years ago has likely been spent, and thus the company will likely have to file bankruptcy. Furthermore, the crypto market has seen a large decrease in hype and viability since the offering in 2017.
Carolyn M. Welshhans, Associate Director in the SEC’s Division of Enforcement said “BCOT did not provide ICO investors with the information they were entitled to receive in connection with a securities offering. We will continue to consider appropriate remedies, such as those in today’s order, to provide investors with compensation and required information and to provide companies who conducted unregistered offerings with an opportunity to move forward in compliance with the federal securities laws.”
It will be interesting to see the next batch of ICOs that get charged by the SEC. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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