- The fine relates to a 2017-2018 unregistered ICO
- Block.One has agreed to pay the fine
- SEC has offered Block.One a waiver from ongoing restrictions
The US Securities Exchange Commission (SEC) has handed blockchain company Block.One a $24 million civil monetary penalty. The civil settlement is in connection with an unregistered Initial Coin Offering (ICO) the EOS Maker undertook in 2017-2018.
Without Proper Registration
The Securities and Exchange Commission announced via a press release on Monday, September 30, 2019, that the company which operates in Virginia, Blacksburg and Hong Kong raised $4.2 billion dollars without properly registering the token offering or seeking exemption from registration. SEC showed that these denied investors access to material information they needed to make informed decisions. Steven Peikin, a co-director at SEC’s Division of Enforcement said:
“Block.one did not provide ICO investors the information they were entitled to as participants in a securities offering […] The SEC remains committed to bringing enforcement cases when investors are deprived of material information they need to make informed investment decisions.”
Block.One has agreed to settle the charges, according to the SEC which amounts to 0.0058 percent of the initial raise. As per SEC’s press release, Block.One began its token sale a short time before SEC released its DAO Report and went on for about a year after the publication of the report.
An Important Waiver
Block.One gave its own press release stating the settlement applies only to the sale of the initial ERC-20 token it sold where EOS holders swapped their Ethereum-based tokens with real EOS tokens when the network went live. Block.One added that its ERC-20 token was no longer in circulation and there was no need to register it as a security with SEC. The company stated:
“The SEC has simultaneously granted Block.one an important waiver so that Block.one will not be subject to certain ongoing restrictions that would usually apply with settlements of this type. Block.one believes the SEC’s granting of this waiver evidences Block.One’s continuing commitment to compliance and best practices in the United States and globally.”
Block.One offered for sale 900 million tokens shortly before SEC released the DAO Report of Investigation, which confirmed that firms issuing distributed ledger or blockchain technology-based securities are required to register offers and sales of such securities. The company raised several billion dollars’ worth of digital assets globally, including a portion from US investors.
In several past cases between SEC and crypto, it required project founders to register tokens as securities so they could fall under some restrictions that might limit its usage. Block.One stated:
“We are excited to resolve these discussions with the SEC and are committed to ongoing collaboration with regulators […..] as the world continues to develop more clarity around compliance frameworks for digital assets.”