The Securities and Exchange Commission announced charges against blockchain services company BitClave PTE, headquartered in San Jose, Calif., for conducting an unregistered initial coin offering (ICO) of digital asset securities.
BitClave agreed to settle the charges by returning proceeds from the offering and paying additional monetary relief to be distributed to investors through a Fair Fund.
According to the SEC’s order, from June to November 2017, BitClave raised over $25 million by selling its Consumer Activity Tokens (CAT) to approximately 9,500 investors, including investors in the U.S.
The order finds that, as explained in its offering materials, BitClave planned to use the ICO proceeds to develop, administer, and market a blockchain-based search platform for targeted consumer advertising.
BitClave emphasized its expectation that the tokens would increase in value, and took steps to make the tokens available for trading on third-party digital asset trading platforms after the ICO.
The order finds that BitClave failed to register their offers and sales of CAT, which constituted securities. CAT has since been removed from many of the third-party trading platforms, and BitClave is currently winding down its operations and does not plan to continue developing or supporting the platform.
“Issuers of securities, traditional or digital, must comply with the registration requirements of the federal securities laws,” said Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit. “The remedies ordered by the Commission will provide meaningful relief to investors in this unregistered offering.”
The SEC’s order finds that BitClave violated the registration provisions of the federal securities laws. Without admitting or denying the SEC’s findings, BitClave agreed to pay disgorgement of $25,500,000, prejudgment interest of $3,444,197, and a penalty of $400,000.
The order establishes a Fair Fund to return monies paid by BitClave to injured investors. BitClave also agreed to transfer all remaining CAT in its control to the fund administrator for permanent disabling, publish notice of the order, and request removal of CAT from all digital asset trading platforms.
The SEC’s investigation was conducted by Amanda Straub of the Enforcement Division’s Cyber Unit and Serafima K. McTigue of the San Francisco Regional Office. The case was supervised by Steven Buchholz and Ms. Littman of the Cyber Unit.