US SEC Hits ICO Startups with Investigations, ICO Founder Gets Jail Time
Paragon Coin Inc. and CarrierEQ (AirFox) Inc. are given out settle orders by the SEC; SALT Lending and Erik Voorhees are under investigation; owner of REcoin and DRC World is to be sentenced 5 years maximum for deceiving investors
On 16 November, the US SEC issued a public statement for digital asset securities issuance and trading. In the statement, the regulatory body said it issued settle orders against Paragon and AirFox for unregistered token offerings.
Both startups have agreed to pay fines and compensate participants of the ‘illegal’ ICO who intend to make a claim. The two companies have also agreed to register their tokens as securities.
SALT Lending and Erik Voorhees
According to a recent article by Wall Street Journal, SALT Lending, together with its previous board member, Erik Voorhees are under SEC investigation due to the question of whether SALT tokens are a security. If it is a security then it should register with the SEC before conducting ICO.
SALT Lending was subpoenaed by the US SEC back in February 2018. The cause for the subpoena was the SEC trying to gain information on its 2017 $50 million ICO.
In addition, Voorhees, who was banned in 2014 from offering BTC securities, is being probed by the regulatory body on his involvement with SALT Lending, which may have violated the ban. He labeled the WSJ article as erroneous and misleading, implying he observes the terms of his SEC settlement.
Brian Klein, Voorhees lawyer (and also represents Charlie Shrem in a separate case), called the article an ‘unfair attack’ towards his client.
REcoin and DRC World Owner Pleads Guilty
Maksim Zaslavskiy pleads guilty for conspiring to commit securities fraud concerning his REcoin and DRC World ICOs. A New York federal judge sentenced him to a maximum of 5 years incarceration.
REcoin was advertised by Zaslavskiy as a real estate-backed cryptocurrency. He alleged his REcoin ICO sold 2.8 million tokens and secured $2 million to $4 million. But in truth, there were only 1000 investors and he was only able to raise approximately $300,000.
The Diamond Reserve Club, or DRC World, is a membership-only club with a supposedly diamond-backed cryptocurrency.
Another Recent SEC Legal Action
On 9 November, Finrazor reported that the SEC issued a cease-and-desist order to cryptocurrency exchange EtherDelta for operating without proper authorization.
