The U.S. Securities and Exchange Commission today filed a lawsuit against ICOBox, a company that provides services to other companies undertaking initial coin offerings, and founder Nikolay Evdokimov for breaching securities laws.
The lawsuit claims that ICOBox breached securities law when it raised $14.6 million in its own ICO in 2017 by failing to register the offering as a security as is required under the Securities Act of 1933. In a twist to previous SEC ICO lawsuits, ICOBox is also alleged to have breached securities law by acting as an unregistered broker for other digital asset offerings.
As with previous cases, the SEC alleges that the tokens offered by ICOBox in its ICO were pitched to investors as securities and should have been registered as such. “The complaint alleges that defendants claimed the tokens would increase in value upon trading and that ICOS token holders would be able to swap them at a discount for other tokens promoted on the ICOBox platform,” the SEC said in a statement. The SEC also claims that Evdokimov tricked investors into purchasing tokens by providing them with false information.
Those are considerable allegations by themselves, but the more serious of the charges is that the company acted as an unregistered broker. “The complaint further alleges that ICOBox failed to register as a broker but acted as one by facilitating initial coin offerings that raised more than $650 million for dozens of clients,” the SEC statement added.
ICOBox claims to have assisted in over 100 ICOs with a number still live on its site including INS, Universa, Play2Live, Crypterium, Celsius, Storiqa, Tokenstars and CrowdGenie.
“By ignoring the registration requirements of the federal securities laws, ICOBox and Evdokimov exposed investors to investments, which are now virtually worthless, without providing information that is critical to making informed investment decisions,” Michele Wein Layne, regional director of the Los Angeles Regional Office said in a separate statement.
This isn’t the first time the SEC has targeted ICOs. The commission came to a settlement with CarrierEQ Inc. and Paragon Coin Inc. over similar charges in November, while the SEC is currently pursuing Veritaseum through the courts.
The SEC is seeking injunctive relief, disgorgement with prejudgment interest and civil money penalties.
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