The United States Securities and Exchange Commission (SEC) has ordered EOS.IO software developer, Block.one to pay a fine of $24 million for their initial coin offering conducted between mid-2017 and 2018.
The SEC noted in a press release on Monday that the ICO through which Block.one raised the equivalent of “several billion dollars” was unregistered and thus represented a violation of U.S securities law.
The SEC further alleged that Block.one proceeded with the ICO despite the DAO report published in 2017 to categorically state that nearly all initial coin offerings must be registered with the regulatory body.
Also, noteworthy in the SEC release is that Block.one promised investors that the raised funds would be used for “general expenses, and also to develop software and promote blockchains based on that software,” which turned out to be the EOS.IO project.
While the SEC did not say that Block.one has failed to deliver on its promise to investors, the regulator’ ruled that the company “did not register its ICO as a securities offering pursuant to the federal securities laws, nor did it qualify for or seek an exemption from the registration requirements.”
As punishment, Block.one was mandated to pay a civil penalty of $24 million which comes off as slightly insignificant when compared to the $4 billion which the company had raised during its ICO.
Specifically, the fine amounts to just 0.6 percent of the total $4 billion raise, a sum that Block.one has accepted to pay.
EOS Cryptocurrency Not Affected
In its press release regarding the settlement, Block.one pinpointed that their charges for which they have settled with the SEC involve Ethereum issued tokens (ERC-20) that the company used for its ICO. Given that these tokens are no longer in existence or traded, it would not be registered as a security with the SEC, the release explained.
Block.one also mentioned that as part of the current settlement, the U.S SEC granted the company a waiver that would usually have been associated with such agreements.
In some past SEC cases with crypto projects, founders were required to register their tokens as ‘security,’ thus bringing them under certain restrictions that could potentially limit its usage. The company wrote in a statement,
We are excited to resolve these discussions with the SEC and are committed to ongoing collaboration with regulators […..]as the world continues to develop more clarity around compliance frameworks for digital assets.
Notice: This post has been updated to reflect the accurate sum of the SEC fine which is $24 million. An earlier version of the article wrongly stated that Block.one would pay a fine of $26 million.
