In what will come as a surprise, the Securities and Exchange Commission (SEC) announced that Russia-based ICO Rating will be paying $268,998 to settle charges, that it failed to disclose payments that it received from issuers in return for publicizing their digital assets securities offerings.
The investigation was conducted by J. Ashley Ebersole and Louis J. Gicale, Jr., in the SEC’s Washington, DC Office and supervised by Melissa Robertson.
The SEC’s order stated that between December 2017 and July 2018, ICO Rating produced research reports and ratings of blockchain-based digital assets, including “tokens” or “coins” that were securities, and published this content on its website and on social media. According to the website’s description, it portrayed itself to be “a rating agency that issues independent analytical research,” and stated that its mission was “to help the market achieve the necessary standards of quality, transparency and reliability.”
Melissa Hodgman, Associate Director of the SEC’s Enforcement Division said, “The securities laws require promoters, including both people and entities, to disclose compensation they receive for touting investments so that potential investors are aware they are viewing a paid promotional item. his requirement applies regardless of whether the securities being touted are issued using traditional certificates or on the blockchain.”
What is puzzling is how does the SEC have any jurisdiction over a website that is based in Russia?
The SEC order also found that ICO Rating violated the anti-touting provisions of Section 17(b) of the Securities Act of 1933. The rating company did not accept or deny the federal agency’s findings, but nonetheless agreed to pay $106,998, and a civil penalty of $162,000.
Maybe this is the kind of hyper regulations, Crypto Mom Hester Peirce referred to her in her speech, earlier this month. At the time she had said, “The cross-border regulatory concerns in crypto track these standard concerns, but are magnified for several reasons. First, countries all over the world are still in the early stages of determining how and whether to regulate crypto. Uncertainty about what the rules in any particular country are makes a determination of which country’s rules apply even more difficult.”
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