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According to a press release on September 18, the U.S. SEC has taken legal actions against a blockchain and crypto company called ICOBox and its founder Nikolay Evdokimov for illegally distributing $14 million worth of the company’s digital token and operating as an unregistered broker for other digital asset offerings.
The United States District Court for the Central District of California has ordered to conduct the investigation which was led by Brent W. Wilner and was supervised by Victoria A. Levin, Alka N. Patel, and Ms. Layne of the Los Angeles Regional Office.
As the SEC reported, the crypto firm approached the public in 2017 in order to raise funds for the primary development of a platform that would promote initial coin offerings. However, the company went ahead without registering it with the regulatory body of the country and distributed $14 million worth of “ICOS” tokens to over 2,000 investors.
The complaint also alleges that the defendants lured in investors by claiming that ICOBox would be rapidly successful and the token price would skyrocket upon trading. Moreover, the token would be available for swapping with other tokens promoted on ICOBox’s platform at a discount price. However, ICOS tokens turned out to have no value at all.
According to complaint documents filed by the SEC:
“Defendants claimed that ICOBox would be successful — and the ICOS tokens valuable — due to the efforts of ICOBox’s management team, who would curate potential digital asset projects and attract ‘100+’ clients per month. As of the date of ICOBox’s offering, ICOBox had yet to support a single token sale to completion.”
Further, the promoter of ICOBox failed to register as a security broker, while still acted and operated as a licensed one. With the fake promises of the ICOBox platform, the firm raised about $650 million of funds from its clients.
Michele Wein Layne, Regional Director of the Los Angeles Regional Office said:
“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.”
The SEC imposed several charges on ICOBox and its founder Evdokimov, including violating the registration requirements of the federal securities laws and seeks injunctive relief, disgorgement with prejudgment interest, and civil money penalties. With these charges, the SEC is looking to recover the investors’ funds with interest and other penalties as well.
This isn’t the first time that the SEC has gone after a blockchain company. The SEC has been taking serious measurements when it comes to regulations in the crypto market and staying strict with it. For instance, the SEC has sued Health Nexus, a healthcare-related blockchain ecosystem which planned to conduct a token sale in an unregistered initial coin offering in 2017.