According to a Wall Street Journal report, three firms that had raised about $40 million collectively via ICOs in 2017 have not honored the terms of their settlement with the SEC. According to the settlement they reached with the SEC, the firms were supposed to refund investors the funds they invested in the ICOs. This was in exchange for lower fines. However, they had not done so by the deadlines they had agreed on with the SEC.
The Firms
According to an SEC document, Airfox was a business based in Massachusetts, whose mobile technology allowed the users of certain US telecom operators to earn free or discounted data or airtime when they viewed ads on their mobile devices. The company created an ICO during in which it sold AirTokens and it managed to raise about $15 million. After legal action, the SEC managed to shut down the ICO and the company was ordered to refund its investors by October 16, 2019.
Another company that was sued by the SEC was Paragon, which was purportedly going to incorporate blockchain technology into the cannabis industry. According to an SEC document, the company held an ICO during which it sold PRG tokens. During the ICO, the company managed to raise about $12 million. However, the SEC sued the company for failing to register as a securities sale. The company reached a settlement with the ICO and it agreed to reimburse investors by October 16, 2019. Both Paragon and Airfox had agreed to pay $250,000 in fines in November 2018.
The third company that reached a settlement with the SEC is Gladius. The company held an ICO for GLA tokens during which it managed to raise around $12.7 million. Gladius had agreed to pay a penalty to the SEC as part of its settlement agreement but it did not do so. The SEC had given the company credit for self-reporting violation of federal securities laws.
The three firms were required to submit registration statements but only Paragon and Airfox filed the documents. However, Paragon did not respond to a letter sent by the SEC requesting information on shareholder rights and its accounts. Besides that, Paragon failed to issue quarterly updates to the SEC since it registered its tokens with the Sec. Gladius was supposed to have filed the registration statement by May 20. However, it claims that it managed to secure an extension until November 18.
Paragon and Airfox should have paid back investors by October 16. However, Airfox claims it received an extension until December 28. Paragon claims that investors who want a refund have to submit a claim by November 21. SEC documents show that both of these firms may not have the funds to repay investors. For instance, Paragon owns assets of $95,659 while its liabilities are $14.9 million while Airfox owes $15.4 million while its assets are $6.1 million.
SEC Has Been Aggressively Pursuing Federal Securities Laws Violators
In 2019 alone, it is estimated that the SEC has suspended 271 issuers of what it deems securities. It has also obtained 31 court orders to freeze assets and managed to collect over $4.3 billion in penalties and disgorgement.
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