Cryptocurrency Firms Charged by SEC Are Reportedly Navigating Around Settlement Terms


WSJ reports that several companies are failing to meet investor repayment and transparency deadlines issued by SEC. 

SEC efforts to push for accountability and law compliance from cryptocurrency start-ups seem to bear no fruits. The crypto watchdog has listed many digital assets as securities that are subject to investor protection laws. During its operations, it has charged several crypto firms with illegal digital tokens sales, and had faltered fundraising methods.

Last year SEC issued subpoenas and request information to many technology start-ups and advisory firms that are involved in the cryptocurrency market for alleged violation of security laws

Agreeing to Settle Is Different from Actual Settlement 

Many of the companies charged with operating unregistered and Initial Coin Offerings (ICOs) accept the SEC settlement terms without denying or confirming the charges. 

According to an anonymous source from the SEC, several companies have missed their deadlines to comply with the SEC’s settlement terms. 

It is reported that Airfox and Paragon, which were among the first SEC settlements, might fail to settle the terms outlined by SEC. The problem, as the reports states, many of the firms that SEC sanctioned may not have enough resources to refund their investors or pay fines.

The report mentions Michael Dick, a former official from the SEC’s Enforcement Division stated: 

“I looked at it then and look at it now as impractical because, for many projects, they spent the money in accordance with what they told purchasers, they would spend money on- to build out the project.”

The Challenge Is Regulating an Exponentially Growing Market

The technology industry is experiencing rapid growth of blockchain technology and digital currencies, which brings about increased token sales, and ICO’s. 

The US Securities and Exchange Commission (SEC), puts emphasized scrutiny on blockchain and cryptocurrency projects. It has also taken action many times, against start-ups concerning token offerings that defraud investors.

The problem, however, is that the pace at which the crypto space is moving leaves financial authorities wanting for more regulations. 

It is estimated that due to the highly unregulated nature of virtual currencies, approximately $1.36 billion worth of scams such as fraud, phishing, digital theft, and hacking involving cryptocurrencies occurred by March 2018.

SEC Has Settled Many Cryptocurrency Scam Cases, but Will They Comply?

The decentralized and anonymous nature of cryptocurrencies makes it hard to pinpoint subtle or cleverly-strewn scams that involve crypto-projects scamming from investors, primarily through ICOs.

 In January, SEC stopped AriseBank ICO for trying to default retail investors to invest in the first decentralized bank in the world. is one of the blockchain companies ordered by the SEC to pay a fine after being found guilty of operating an unregistered ICO. SEC stated:

“Companies that sell securities to US investors must comply with the securities laws irrespective of the industry they operate in or the labels they place on the investment products they offer.”

SEC also charged EtherDelta founder Zachary Coburn with operating an unregistered ICO sec stated

“Without admitting or denying the findings, Coburn consented to the order and agreed to pay $300,000 in disgorgement plus $130,000 in prejudgment interest and a $75,000 in penalty.

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