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Regulation

SEC imposes civil penalties on two ICOs for violating security-registration laws

The Securities and Exchange Commission announced it has settled charges against two companies that sold cryptocurrencies via ICOs. Both companies have agreed to return funds to investors and register their tokens as securities. These companies will also be required to file periodic reports to the SEC and pay penalties for violating securities registration laws. "These are the Commission’s first cases imposing civil penalties solely for ICO securities offering registration violations," the SEC said in a press release.

CarrierEQ Inc. (Airfox) and Paragon Coin Inc, conducted ICOs in 2017, raising $15M and $12M, respectively. Airfox is developing a mobile app providing financial services to emerging markets. Paragon is developing a suite of blockchain solutions for the cannabis industry.  According to the SEC "neither Airfox nor Paragon registered their ICOs pursuant to the federal securities laws." Stephanie Avakian, co-director of the SEC’s Enforcement Division, added "we have made it clear that companies that issue securities through ICOs are required to comply with existing statutes and rules governing the registration of securities" and that "these cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets." (Source: SEC)