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ICO gone wrong – start-up ordered to return $25.5m to investors

SEC finds BitClave responsible for selling unregistered securities in its initial coin offering

Regulator

The US Securities and Exchange Commission (SEC) has brought charges against BitClave for “conducting an unregistered initial coin offering (ICO) of digital asset securities” and demanded that the crypto start-up reimburse the 9,500 investors who took part in the sale.

Although the California-based company has not admitted or denied the SEC’s findings, it has agreed to return the $25m (£20.2m, €22.5m) it raised within 32 seconds in November 2017, a further $3.4m of interest and a fine of $400,00.

Hoping to decentralise and disrupt the online advertising market, BitClave attempted to create a business whereby internet users were compensated with a token (CAT) in return for their data, which could then in turn be used for targeted ads.

The regulator stated that: “BitClave emphasised 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.”

At its peak in January 2018, CAT stood at $0.324, in less than a month it had fallen to $0.040 and by mid-March 2020 BitClave’s token sank to an all-time low of $0.00004.

Reacting to the case, the head of the SEC Enforcement Division’s Cyber Unit, Kristina Littman, stated: “Issuers of securities, traditional or digital, must comply with the registration requirements of the federal securities laws. The remedies ordered by the Commission will provide meaningful relief to investors in this unregistered offering.”

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