Nov. 19, 2018
The Securities and Exchange Commission said it settled charges with Carrier EQ Inc.(Airfox) and Paragon Coin Inc., alleging that they sold tokens in initial coin offerings without proper registration, according to a release from the agency.
Boston-based Airfox raised about $15 million in digital assets for a token-denominated ecosystem that would let users in emerging markets earn currency in exchange for them viewing advertising, according to the SEC. By October 2017, Airfox had sold 1.06 billion tokens to about 2,500 investors, according to the SEC order.
Paragon raised $12 million from about 8,323 investors for its plan to develop a plan to use blockchain technology in the cannabis industry, according the SEC.
The agency said that neither firm registered their ICO under federal securities law, nor did they qualify for an exemption. Both firms agreed to return funds to harmed investors, register their tokens as securities, pay a penalty and file periodic reports with the SEC, according to the release.
Each company was fined $250,000, according to the SEC, however an SEC spokesman said the exact restitution amount was not specified in the announcement.
“We have made it clear that companies that issue securities through ICO’s are required to comply with existing statutes and rules governing the registration of securities,” said Stephanie Avakian, co-director of the SEC's enforcement division, in the release.
She said these cases are an indication that the agency will be on the lookout for future violators.
The action is the first time the SEC imposed such penalties in an ICO case, the agency said in the announcement.
In December 2017, the SEC imposed a cease-and-desist order on Munchee Inc., but did not impose a fine. That firm, which sought $15 million in an ICO, consented to the order without admitting or denying guilt, and repaid investors, according to SEC documents.
Jessica VerSteeg, chief executive of Paragon, said the company has been working more than a year on the agreement and said it will “effectively put an end to the uncertainties of the legal status of our PRG tokens,” in a company release.
She said the company has entered agreements with many cannabis companies, including Dreamfields, Fundanna, Flux, Oakland Distribution, Pearl Pharma and Mammoth Labs, in a release. She added that the company has launched Phase I of its mobile app, which will allow for a Paragon Space member portal and the PRG wallet.
Airfox CEO Victor Santos said in a release that the company was pleased with the settlements with the SEC and the Massachusetts Securities Division. With the agreements, he said the company is “removing uncertainty and positioning Airfox to grow our blockchain platform within a regulatory framework.”
Topics: Bitcoin, Mobile Apps, Regulatory Issues
Companies: Airfox, Paragon Coin
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