BitClave forced to pay back $25.5m from unregistered initial coin offering to investors

Blockchain services company BitClave has agreed to pay back the proceeds of its unregistered initial coin offering (ICO) and settling charges brought on by the Securities and Exchange Commission (SEC).

BitClave agreed to settle the charges by returning proceeds from the offering and paying additional monetary relief to be distributed to investors through a fair fund.

The ICO occurred in between June to November 2017 and saw BitClave raise over $25m by selling its Consumer Activity Tokens (CAT) to approximately 9,500 investors, including investors in the US.

BitClave planned to use the money to grow its company and to market its blockchain-based search platform for targeted consumer advertising.

The SEC order found that BitClave failed to register the offers and sales of CAT, which constituted securities. CAT has since been removed from many of the third-party trading platforms, and BitClave is currently winding down its operations and does not plan to continue developing or supporting the platform.

“Issuers of securities, traditional or digital, must comply with the registration requirements of the federal securities laws,” said Kristina Littman, chief of the SEC enforcement division’s Cyber Unit.  “The remedies ordered by the Commission will provide meaningful relief to investors in this unregistered offering.”

The SEC’s order finds that BitClave violated the registration provisions of the federal securities laws. Without admitting or denying the SEC’s findings, BitClave agreed to pay disgorgement of $25.5m, prejudgment interest of over $3.4m  and a penalty of $400,000.

The news comes as the blockchain and cryptocurrency space has been growing for five years, although, admittedly with a dip in 2019. Between 2015 and 2019 companies in the sector collectively raised over $14.2bn in global investment across 641 transactions, according to FinTech Global’s research.

The slowdown in the subsector’s investment in 2019 occurred at the same period when major cryptocurrencies traded way below their historical peaks. Still, the blockchain and cryptocurrency space has been maturing through the period, with more investors funding later stage rounds. This is most notably seen in the amount of global funding in deals valued at $50m and above, which has increased 4.6 times between 2015 and 2019.

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