The U.S. Securities and Exchange Commission (SEC) imposed cease-and-desist orders and fines upon three parties involved in UpToken on April 28.
SEC names parties involved in UpToken ICO
The SEC said that Up Global and Coinme — as well as Neil Bergquist, founder and CEO of both companies — were involved in a cryptocurrency securities offering.
That offering involved the ICO sale of an Ethereum-based cryptocurrency called UpToken, which was intended to fund the deployment of new Coinme ATMs.
The three parties successfully raised about $3.65 million of cryptocurrency from the ICO, and Coinme partially spent those funds on new ATMs. Users who purchased UpToken received discounts and rewards when they used the token with Coinme ATMs.
However, the SEC complained that the participants sold securities without registering and without obtaining an exemption from registration.
Furthermore, the SEC said that Up Global and Bergquist falsely claimed that Up Global would limit the supply of UpToken and that Coinme would need to buy back the asset from investors, thus creating demand and increasing token value. In fact, Up Global and Bergquist secured a significant supply of UpToken before and during the ICO.
Additionally, Up Global and Bergquist reported misleading fundraising amounts, stating that up to $18.9 million had been raised when only $3.7 million had been raised.
Involved parties face fines, operating requirements
The SEC’s order will require all three parties to destroy all UpToken in their possession.
Up Global and Coinme will also be required to publish a notice of the order and request that other trading platforms remove the token from their services. The two companies must also indefinitely refrain from taking part in any cryptocurrency security offering.
Bergquist must refrain from taking part in crypto securities offerings for just three years and will be allowed to trade other cryptocurrencies on a personal basis.
Each party will also pay a fine to the SEC. Up Global will pay $3.52 million, CoinMe will pay $250,000 and Bergquist will pay $150,000.
Together, those fines are close to the amount raised by the UpToken ICO.
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