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 a crypto asset called “UpToken.”

According to the SEC Order, from October 16, 2017, to December 15, 2017, Respondents conducted an initial coin offering that they described as a “token sale,” in which they offered and sold securities to the public in the United States and abroad, in the form of UpToken, which was issued on the Ethereum blockchain (the “ICO”).  Based on the facts and circumstances, UpTokens were offered and sold as investment contracts and therefore securities under SEC v. W.J. Howey Co. and its progeny.  However, there was never a registration statement filed for the UpTokens.

As the SEC explained, Respondents never provided UpToken investors with information concerning Coinme’s financial condition or significant existing debts.  Issuers of securities include such information in the registration statement that they file when soliciting public investment, but Respondents never filed a registration statement for their offer and sale of UpToken.  In fact, though, according to the SEC, from its founding in 2014 through the end of the ICO, Coinme’s operating expenses exceeded its total revenue, and in 2017 its operating expenses were more than three times larger than its total revenue.

According to the SEC, Respondents created an expectation among prospective purchasers that the price of UpToken would appreciate as the ATM network expanded and ATM transaction volume increased.  During the ICO, Up Global and Bergquist projected that in 2018 alone, Coinme would deploy over 1,000 ATMs, exceed $1 billion in annual transaction volume, and purchase between $10 and $18 million dollars’ worth of UpToken, thus creating demand.  In reality, there were never more than 69 Coinme ATMs.

In a November 4, 2017 internal email, Bergquist wrote, “More recently I tell people we raised $4M in the last two weeks in order to show that the sale has momentum and to encourage them to experience Fear of Missing Out.”  However, by November 4, 2017, Up Global had only received approximately $2.7 million worth of crypto assets (valued as of the date of receipt).

The Order also said that, in the final week of the ICO in December 2017—as Bergquist was telling potential UpToken investors that Coinme would buy large amounts of UpToken in 2018 and beyond to fund the ATM rewards program and that investors should buy UpToken immediately to avoid paying a “massive premium” for it on secondary trading platforms after the ICO concluded—Bergquist negotiated a 500 bitcoin round-trip transaction with an unaffiliated Hong Kong company. Up Global and Bergquist used this transaction to knowingly or recklessly create a false and misleading impression of the demand for UpToken and the success of the ICO.

According to the Order, Respondents violated Sections 5(a) and 5(c) of the Securities Act by offering and selling securities without having a registration statement filed or in effect with the Commission, or qualifying for an exemption from registration.  Up Global and Bergquist, also violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 because they made materially false and misleading statements, and engaged in other fraudulent conduct, in the offer and sale, and in connection with the purchase and sale, of UpToken.

Coinme, Up Global, and Bergquist agreed, without admitting or denying the SEC’s findings, to settle the charges, cease and desist from future violations of the above securities laws, and comply with certain undertakings.  In addition, Up Global agreed to pay a $3,520,000 penalty, for which Coinme is liable on a joint-and-several basis; Coinme agreed to pay a separate $250,000 penalty; and Bergquist agreed to pay a penalty of $150,000. The SEC Order also bars Bergquist, for a period of three years, from acting as an officer or director of a public company.


David Zaslowsky has a degree in computer science and, before going to Yale Law School, was a computer programmer. His practice focuses on international litigation and arbitration. He has been involved in cases in trial and appellate courts across the United States and before arbitral institutions around the world. Many of David’s cases, including some patent cases, have related to technology. David has been included in Chambers for his expertise in international arbitration. He is the editor of the firm's blockchain blog.