The SEC took precedence of the previous warning it had issued on 25th July 2019 stating that ICOs could be required to register as a security with the SEC. Later in November 2018, SEC had also charged two companies for conducting ‘illegal ICOs.’ The SEC press release noted that,
“The orders impose $250,000 penalties against each company and include undertakings to compensate harmed investors who purchased tokens in the illegal offerings.”
Fines were imposed on Floyd Mayweather and DJ Khaled for endorsing illegal ICO as well. Recently, the ICO has released guidelines for investors and ICO initiators. Although the directions didn’t seem imposing at the time, however, since SEC has taken precedence from its previous press release to impose fines on ICO initiators, the wise thing to do will be to come out clean.
The absence of any regulatory laws and guidelines in 2016 and 2017 had left a lot of entrepreneurs and developers unattended and free to release their ICOs. However, the SEC later warned the investors and creators in 2018 that these offerings should attain permission or consultation from the SEC before releasing it publicly.
Gladius Network which had conducted an ICO during the cryptocurrency price boom had accumulated $13 million through the ICO. The on-going regulatory changes compelled the owners to come out clean. The SEC has directed them to return the funds to the investors and has not imposed any fine on the LLC.
As the unregistered ICO were self-reported and due to lack of regulatory guidelines at the time of their release, the SEC has not imposed any damages to the owners of the LLC.
The SEC press release noted:
The owners of the Gladius Network have signed undertakings to register its tokens as securities according to the Securities Exchange Act of 1934 and will also fine periodic audit report filings to the SEC.
The developments with the Gladius Network is undoubtedly an indication for other ICO initiators to come out clean as well. The leniency of their orders suggests that instead of inviting regulatory and legal action, the company or ICO initiators will now have to return the initial amount to their investors.