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Block.one pays $24m to settle SEC ICO dispute

The SEC finds that Block.one violated the registration provisions of the federal securities laws, resulting in a $24 million civil monetary penalty.

Written by Asha Barbaschow, Contributor Sept. 30, 2019 at 9:58 p.m. PT

Blockchain company Block.one has reached a civil settlement with the United States Securities and Exchange Commission (SEC) relating to an unregistered initial coin offering (ICO) it undertook in 2017-18.

In a statement, Block.one said it would pay a $24 million fine whilst "neither admitting nor denying the SEC's findings".

The settlement relates specifically to the ERC-20 tokens that Block.one sold on the Ethereum blockchain between 26 June 2017 and 1 June 2018. The SEC said the unregistered ICO raised the equivalent of several billion dollars over the period in question.

Block.one's offer and sale of 900 million tokens began shortly before the SEC released the DAO Report of Investigation, which confirmed that issuers of distributed ledger or blockchain technology-based securities are required to register offers and sales of such securities.

The company offered and sold the tokens for nearly a year after the report's publication and eventually raised several billion dollars' worth of digital assets globally, including a portion from US investors.

According to the SEC, Block.one did not register its ICO as a securities offering during this time, nor did it qualify for or seek an exemption from the registration requirements.

"Block.one did not provide ICO investors the information they were entitled to as participants in a securities offering," co-director of the SEC's Division of Enforcement Steven Peikin said. "The SEC remains committed to bringing enforcement cases when investors are deprived of material information they need to make informed investment decisions."

The SEC's order found that Block.one violated the registration provisions of the federal securities laws.

The ERC-20 token is no longer in circulation or traded, and Block.one has said it will not require the token to be registered as a security with the SEC.

"We are excited to resolve these discussions with the SEC and are committed to ongoing collaboration with regulators and policy makers as the world continues to develop more clarity around compliance frameworks for digital assets," the company wrote.

"The extraordinary success story of America is in part built upon its rich history of supporting entrepreneurship and emerging technologies, and we encourage and applaud the efforts of entrepreneurs and leaders from tech, finance, and other industries who are striving to make the US an environment where technology can advance and thrive in a predictable and inclusive way."

Block.one said the SEC had granted a "waiver" to it, which according to the company means it will not be subject to certain ongoing restrictions that "would usually apply with settlements of this type".

"Block.one believes the SEC's granting of this waiver evidences Block.one's continuing commitment to compliance and best practices in the United States and globally," it said.

The settlement, the company said, resolves all ongoing matters between Block.one and the SEC.

"Blockchain's ability to better align organisations with their consumers, increase the transparency of critical database infrastructure, and better distribute value and wealth throughout society remains our company's focus, and we will continue to fight for the development of our industry to achieve as much alignment around policy and best practices as possible," Block.one continued.

"As always, we are humbled by, and thankful for, the community support that enables everything we do."

Last year, a New York judge ruled that ICOs fell under securities law and, therefore, SEC could go after scammers.

In May last year, the Commonwealth Bank of Australia (CBA) lost its group executive of financial services and chief financial officer Rob Jesudason, after he announced that he would join Block.one.

At the time, Jesudason jointed the blockchain firm as its group president and chief operating officer, and also as a member of Block.one's board of directors.

He was charged with the responsibility of "scaling the group's global operations".