Paragon, Airfox ICO Sales Questioned
Paragon and Airfox are the latest targets of the US Securities and Exchange Commission (SEC) wrath concerning ICO sales. The crypto-firms raised a collective sum of $27 million last year in what appears to be illegal ICOs sales. In a statement, the regulating authority confirmed that the two firms acknowledged engagement in the in the illegal ICOs issuance. Paragon and Airfox may be liable for fines up to $250,000. Additionally, the firms may have to return all proceeds to the investors.
The penalty is in line with SEC’s regulations on ICOs issuance. The SEC argues that startups are issuing ICOs to fund their development. Accordingly, an ICO is comparable an IPO and is, therefore, subject to securities laws. Additionally, regulations will also help root out fraud. This is especially important as fraud and manipulation in the crypto industry stem from ICOs. Speaking about the case of Paragon and Airfox, a SEC representative said that “We wish to emphasize […] that market participants must still adhere to our well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated form or using new technologies, such as blockchain.”
ICO Funding Slowing
The SEC’s crackdown on unregistered ICOs is blamed for an industry-wide ICO funding drop. The month of September recorded the lowest ICO funding in 17 months and research by Autonomous speculated that SEC’s new regulations might be responsible for the fall. The research noted that investors preferred Security Token Offering (STOs) due to their compliance with securities regulations.
Speculators in the Cryptocurrency industry welcome the SEC’s move to enforce the regulations on rogue firms. They believe that the regulations will help legitimize the industry by restraining the bad guys. Herbert Sim, CCO, cryptology, to Bitcoinist believes that, “In order for the space to move forward and grow, regulators need to put standards in place which separate the weeds from the roses. Regulating the cryptocurrency ‘Wild West’ will help legitimize, and subsequently grow the industry.”
The Paragon and Airfox case comes after the actions against the decentralized digital assets exchange platform Etherdelta. The platform’s founder, Zachary Coburn agreed to settle “USD 300,000 in disgorgement, USD 13,000 in prejudgment interest, as well as a penalty of USD 75,000, ‘without admitting or denying the findings.’”
According to Stephanie Avakian, co-director of the SEC’s Enforcement Division, EtherDelta failed to register with SEC or rather apply for exception besides qualifying as an online securities operator. SEC was however, lenient with EtherDelta because of Coburn’s cooperation during the investigation.