SEC Ramp Up Continues as Sia Network Founder Reaches $225,000 Settlement

The company behind the Sia decentralized cloud storage network, Nebulous Inc. announced Tuesday; it reached a settlement agreement with the United States Securities and Exchange Commission (SEC) for the sale of tokens that were supposed to be registered with the Commission as securities.

The SEC alleged that Nebulous defiled the Securities Act by offering and selling securities in 2014 and 2015, without obtaining a registration statement in effect with the Commission and “without qualifying for an exemption from registration.”

Precisely In May 2014, the company conducted a $120,000 offering of a token dubbed Sianotes through Bitcointalk.org, which later was converted to Siafunds upon the inception of the Sia network in 2015. 

Nebulous, via the offering entitled investors to “a percentage of future revenue generated from transactions on the Sia network and user application Nebulous represented it was then developing,” the SEC alleged.

However, the Nebulous team wrote in today’s update that during the time of the offering, they didn’t anticipate that the Commission might later deem Sianotes or any blockchain assets to be securities.

It was only in 2018, that the regulator contacted Nebulous to inform it about an investigation concerning the Sia network, even though the startup had conducted another $1.5 million tokenized securities offering designed to meet all SEC requirements.

Nebulous meanwhile cooperated and provided SEC with documents regarding the company and its offerings, including the information about the Sia network. Upon the Investigation, however, SEC concluded that Siafunds were securities.

Without admitting or denying liability, Nebulous agreed to a settlement at a total of $225,000; disgorgement of $120,000, civil money penalty of $80,000, and prejudgment interest of $24,601.85.

As Nebulous further noted, the SEC order did not take any enforcement action concerning the Siacoin token or any current activity on the Sia network, and the order does not require the firm to register the Siacoin token as a security.

However, the firm’s COO Nebulous Zach Herbert expressed confidence that the settlement is favorable for the project despite the imposed fines being almost double the amount they raised in the alleged unregistered securities offering.

He said:

While disappointed that the SEC chose to pursue a steep penalty of almost double what we raised in our 2014 offering of Siafunds, especially compared to their lax handling of EOS, we view this settlement as highly positive for Sia.

Earlier today, Coinfomania reported that the SEC settled charges with Block.one (the company behind the EOS network) imposing a fine of $24 million on the startup even though they had raised as much as $4 billion in a 2017 ICO.

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