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SEC Sues ICO Incubator Over Unregistered Token Offering | The Recorder – Law.com


U.S. Securities and Exchange Commission building in Washington, D.C. January 5, 2019.U.S. Securities and Exchange Commission building in Washington, D.C. Jan. 5, 2019.

The U.S. Securities and Exchange Commission has sued a cryptocurrency incubator, claiming it ran afoul of the federal securities laws by failing to register its own $14.6 million initial coin offering and by acting as an unregistered broker for other ICOs.

The agency filed suit against ICOBox and its founder Nikolay Evdokimov in U.S. District Court for the Central District of California on Wednesday claiming that ICOBox should have registered its 2017 offering of roughly $14.6 million worth of “ICOS” tokens to more 2,000 investors. The agency further alleges that ICOBox failed to register as a broker as it helped facilitate about 35 ICOs that raised more than $650 million for its clients.

ICOBox, which describes itself as the “first and the biggest new generation Blockchain Growth Promoter and Business Facilitator for companies seeking to sell their products via ICO/STO crowdsales” on its website, did not immediately respond for a request for comment Wednesday. Defense counsel had yet to make an appearance for the company or Evdokimov on the case docket at the time of publication. The SEC, which often provides information about defense counsel upon filing charges, indicated that the company has no current representation.

According to the agency, ICOBox forecasted that it would help launch roughly 800 ICOs per year and touted that people who bought its own “ICOS” tokens would be able to swap them to buy into ICOs it was helping to launch on a deferred fee basis at a discount rate. According to the SEC, ICOBox recently announced it was discontinuing the platform for swapping its tokens for deferred-payment clients.

“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,” said Michele Wein Layne, regional director of the SEC’s Los Angeles Regional Office, in a press release announcing the agency’s lawsuit.

The complaint notes that Paragon Coin, a web-based company that raised about $12 million through an ICO to implement blockchain technology for the growing cannabis industry, was among the companies ICOBox helped get to market. The SEC imposed a $250,000 penalty against Paragon Coin late last year, and the company agreed to register its offering, make all associated filings, and compensate investors harmed by purchasing tokens in the offerings.



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