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Two ICOs charged with Civil Penalties for Unregistered Securities by the US SEC

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For the first time ever, civil penalties have been levied against two ICOs on account of their failure to register their token sales. The SEC stated that settlements were agreed upon with CarrierEQ Inc. and Paragon Coin Inc. Both companies had received prior warnings from the SEC regarding their token sales in the previous year.

As per the terms of the settlement, both these companies were required to refund money to investors who were negatively impacted by the actions of the company. They were also required to pay a financial penalty of $ 250,000/- each along with registration of their tokens as securities and ensure periodic filing and reporting with the SEC.
As per the SEC, the tokens of both Paragon and Airfox were deemed as securities as they fitted the definition of an investment having its returns linked to the efforts or success of a third party. Hence both these company were required to register with the Securities Exchange Commission under the United States Federal Laws.

They were also required to pay a financial penalty of $ 250,000/- each along with registration of their tokens as securities and ensure periodic filing and reporting with the SEC.

Airfox, a Boston, M.A., based start-up had raised tokens of approximately $15 million in value towards funding and developing its tokenised data system focused on emerging markets, whereas ParagonCoin had raised about $12 million for the development of a blocked-based solution to be used by the cannabis industry.
The Co-Director of the Enforcement Division of the SEC, Stephanie Avakian stated that the SEC will take similar actions against defaulters who are under the violation of any federal laws, rules and regulations related to digital assets.
As per the Wall Street Journal's report, both Airfox and Paragon are yet to admit or deny these SEC claims. According to their settlement orders, both companies are required to file for a third-party audit of their financial statements and undertake various disclosures aimed towards protecting the investors. These audits and disclosures are similar to the ones required before an IPO or Initial Public Offering.

The SEC-registered its first non-fraud case related to ICO registration against Munchee Inc. The company had apparently refunded all the money collected back to its investors and halted its offering before any issuance of tokens, and hence avoided imposition of penalties from the SEC.
The SEC has also launched an investigation against Salt, a crypto-based loan firm. Salt was once associated Erik Voorhees, who Is a high profile individual within the crypto industry. The probe was related to the company's $50 million token sales in 2017.

The Co-Director of the Enforcement Division of the SEC, Stephanie Avakian stated that the SEC will take similar actions against defaulters who are under the violation of any federal laws, rules and regulations related to digital assets.

Also, the suspect of the first case of ICO fraud in the United States pleaded guilty for making falsified statements to investors for obtaining money.

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