SEC Releases Cease-And-Desist Directive and Fines for Parties Engaged in the ICO of UpToken

The Securities and Exchange Commission (SEC) of the United States has released a cease-and-desist order for the top crypto exchange named Coinme as well as its subsidiary Up Global Inc. The reason for issuing the respective order is that the entities were engaged in organizing the cryptocurrency UpToken’s disingenuous and unregistered coin offering.

US Securities Regulator Issues Cease-and-Desist Directive for Those Engaged in UpToken’s Initial Coin Offering

Apart from that, both the platforms, as well as Neil Bergquist (the chief executive officer of the entities), have been directed to recompense fines of up to $3.9M. Formerly, in 2017, Up Global and Coinme organized an initial coin offering (ICO) for UpToken (an Ethereum-based digital token). The purpose of the respective coin offering was to collect funds for the expansion of Coinme ATM activities within the country.

As per the settlement report that has been recently published by the regulatory agency, the ICO remained effective in collecting a cumulative amount of up to $3.65 million. A proportion of the respective collected funds was utilized to deploy up to thirty exclusive Coinme ATMs. On the other hand, the remaining funds were allocated for the rest of the corporate purposes.

Nonetheless, the US-based financial regulatory agency mentioned that the marketing and selling of UpToken was carried out in the form of an investment contract. Hence, the SEC categorized it as a security offering in line with the financial laws implemented within the jurisdiction of the United States. Therefore, all parties engaged in the respective ICO came under accusations related to selling an unlicensed security.

In addition to this, the report published by the SEC also disclosed that Bergquist and Up Global had misguided the likely investors about restricting UPToken’s supply. According to the report, they also deceived the investors by saying that UpToken will be constantly required by Coinme for the funding of the ATM rewards project of the platform. In this way, the report asserted, investors were assured that the price of the asset will increase over time.

In the words of the SEC, the firms at the back of UpToken took several measures to get a great number of assets before the start of the ICO and during the whole procedure. The respective measures took into account an internal transfer between Up Global and Coinme along with a roundtrip transfer related to a Hong Kong-affiliated entity.

Eventually, the SEC’s report also brought to the front that Coinme as well as the other associating parties had deceived the common masses. It claims that a cumulative amount of nearly $18.5M had been collected from the ICO as opposed to the said amount of nearly $3.65M. The respective allegations were raised against Bergquist, Up Global, and Coinme by the SEC.

All the parties moved forward to have a settlement. As noted by the SEC’s report, the agency has prohibited Up Global and Coinme through a cease-and-desist order. Both entities are now permanently banned from taking part in the coin offerings.

Both Up Global and Coinme to Pay Fine

In the meantime, Bergquist is also prohibited from taking part in ICOs but for just 3 years. Eventually, the parties have been directed to recompense the fine. Up Global has been ordered to pay a civil money penalty of up to $3,520,000. On the other hand, the fine imposed on Coinme equals $250,000.