The US Securities and Exchange Commission (SEC) has charged a Russian Initial Coin Offering (ICO) rating service for allegedly failing to disclose payments made in return for touting ICO cryptocurrency events.
On Wednesday, the US regulator said that ICO Rating has agreed to pay $268,998 to settle a damages claim for allegedly accepting payments "from issuers for publicizing their digital asset securities offerings."
According to SEC, between December 2017 and July 2018, ICO Rating churned out research reports and recommendations to assist would-be investors in finding ICOs, tokens, and coins that were genuine and worthwhile prospects for trading -- however, the company did not mention that some issuers would pay for inclusion and ratings.
While ICO Rating touted its services as "a rating agency that issues independent analytical research" for the purposes of "helping the market achieve the necessary standards of quality, transparency, and reliability," it is against the anti-touting provisions of the Securities Act of 1933 to fail to mention paid-for content.
The Russian company neither admitted or denied the practice, but has still agreed to pay a civil penalty of $162,000 and damages of $106,998.
In addition, ICO Rating said it will not conduct such activities in the future.
"The securities laws require promoters, including both people and entities, to disclose compensation they receive for touting investments so that potential investors are aware they are viewing a paid promotional item," said Melissa Hodgman, Associate Director of the SEC's Enforcement Division. "This requirement applies regardless of whether the securities being touted are issued using traditional certificates or on the blockchain."
The ICO boom appears to have died down in the past year, but these speculative events are still under intense scrutiny by regulators due to the high possibility of fraud and exit scams.
Last year, a New York judge ruled that ICOs fall under securities law and, therefore, SEC can go after scammers.
However, it is not just cryptocurrency scams that US departments are watching. In related news this week, the US Internal Revenue Service (IRS) has begun sending letters to cryptocurrency traders with revised tax estimates that include suspected, potentially undeclared virtual asset profits.
Some of the revisions, which can be disputed, amount to thousands of dollars in unpaid tax.
Previous and related coverage
- The SEC is suing Kik over its $100m Kin token ICO
- UK hacker-for-hire jailed for role in SIM-swapping attacks, data theft
- IRS begins tax clampdown on unreported cryptocurrency profits
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