SEC v. Crowd Machine, Inc. was a lawsuit that the United States Securities and Exchange Commission brought against Crowd Machine Inc. (“CMI”), and others, for CMI’s making materially false and misleading statements in connection with an initial coin offering of Crowd Machine Compute Tokens (CMCTs). Rather than using the ICO proceeds for the stated purpose, Defendants diverted more than $5.8 million in ICO proceeds to gold mining entities in South Africa. The SEC also alleged…
Quantstamp is a Blockchain security firm that raised funds through an initial coin offering (ICO). According to the SEC, in August 2017, Quantstamp released a White Paper with respect to its upcoming offering of a crypto asset called QSP, which described Quantstamp’s plans to develop a protocol on the Ethereum blockchain that would provide automated security audits of smart contracts (the “Protocol”). The White Paper also described Quantstamp’s plans to implement a governance system “after the…
Coinme is a company that started by making cryptocurrency transactions available through ATM machines. It originally used its own ATMs but, in January 2019, abandoned that business model and used, instead, the kiosks of the coin counting company, Coinstar. On April 28, 2023, the U.S. Securities and Exchange Commission announced settled charges with Coinme, its subsidiary Up Global, and CEO Respondent Neil Bergquist for conducting unregistered offers and sales of securities in the form of…
The U.S. Securities and Exchange Commission has talked recently about an ever-increasing scope of its jurisdiction — such as with respect to NFTs — and recently brought its first insider trading case dealing with cryptocurrencies. But on August 16, 2022, the SEC brought a type of case that is similar to many others over that past five years. It sued Dragonchain Foundation, Dragonchain Inc., the Dragon Company as well as founder and chief developer Joseph Roets in…
Earlier this month, the United States Department of Justice (DOJ) announced charges against six individuals, in four separate cases, involved in fraudulent crypto related schemes and thereby further highlighted its commitment to protecting investors and consumers. The schemes involved the following alleged fraudulent acts; NFT Fraud (United States v. Le Ahn Tuan): A Vietnamese national and co-conspirators created an NFT called “Baller Ape” and shortly after the first day of trading, engaged in what is…
On January 5, 2022, the United States Securities and Exchange Commission announced its first enforcement action of the year concerning a fraudulent initial coin offering. This is the latest in a long list of enforcement actions by the SEC targeting unregistered digital asset offerings. The SEC charged Australian citizen Craig Sproule and two companies he founded, Crowd Machine, Inc. and Metavine, Inc., with making materially false and misleading statements in connection with an unregistered offer…
Although the heydays of the initial coin offering are now in the rearview mirror, the US Securities and Exchange Commission continues regulatory action against those accused of conducting ICO’s in violation of the securities laws. On September 8, 2021, the SEC charged Rivetz Corp., Rivetz International SEZC, and Steven K. Sprague, the head of both companies, with conducting an illegal, unregistered offering of securities through an ICO. According to the SEC’s complaint, between July and…
Early posts in this blog mentioned how former SEC Chairman Jay Clayton had famously told Congress in February 2018 that “I believe every ICO I’ve seen is a security.” His successor, Gary Gensler, resurrected those thoughts in his prepared remarks delivered on August 3, 2021 to the Aspen Security Forum: I think former SEC Chairman Jay Clayton said it well when he testified in 2018: “To the extent that digital assets like [initial coin offerings, or…
One of the poster-children for the ICO craze in late 2017-18 was an iced-tea company in Long Island, New York known as the Long Island Iced Tea Co. From approximately 2015 to 2017, the company’s principal business was ready-to-drink beverages. In December 2017, the company changed its name to Long Blockchain Corp. (LBC) and announced that it was shifting its business operations from soft drink production to activities related to blockchain technology. The rebranding with…
We previously reported how, on April 3, 2020, multiple class-action law suits were filed in the Southern District of New York against a host of crypto exchanges and token issuers, including Block.one. One of those cases was dismissed, which led to five others then being withdrawn. The case against Block.one has now been settled. At the height of the ICO craze in 2017-18, Block.one raised a record $4 billion in its ICO, much of it…