ICOBox and its founder Nikolay Evdokimov were sued by the Securities and Exchange Commission in a federal court in California for conducting an unregistered securities offering in the form of an initial coin offering, and for engaging in securities brokerage activities without being registered as a broker-dealer. The SEC alleged that ICOBox – which purportedly holds itself out as a facilitator to companies that seek to sell their products through ICO crowdsales – offered and sold approximately US $14.6 million of “ICOS” digital assets between August 9 and September 15, 2017, to over 2,000 persons in the United States and elsewhere. According to the SEC, ICOBox claimed that proceeds from the ICOS ICO would be used to help defray the costs of ICOBox’s services to users who could not afford them and that ICOS tokens were valuable because of the management efforts of ICOBox. The SEC acknowledged in its complaint that the enterprise has helped 30 clients issue digital tokens, raising over US $650 million from investors; one of the clients assisted by ICOBox was Paragon Coin, which previously settled another SEC enforcement action for engaging in its own unregistered ICO. (Click here for details in the article “ICO Promoter Settles SEC Enforcement Action for No Fine After Self-Reporting Potential Securities Law Violations” in the February 24, 2019 edition of Bridging the Week.) The SEC seeks an injunction against defendants as well as disgorgement and profits.

In other legal and regulatory developments regarding cryptoassets:

  • Exchange Formally Withdraws Application to Trade Bitcoin Shares: Cboe BZX Exchange withdrew a proposed rule change to list and trade SolidX Bitcoin Shares by the VanEck SolidX Bitcoin Trust. Cboe BZX has now twice tried to enable shares of SolidX Bitcoin Shares to be traded on its exchange and twice withdrawn rule change proposals in light of SEC apparent opposition. (Click here for background in the article “Try It Again, VanEck SolidX Bitcoin Trust” in the February 3, 2019 edition of Bridging the Week.)  
  • Proposed Law Amendment Would Require CFTC-Regulated Trading Facilities to Have “Unconstrained Access” to Virtual Currency Spot Market Information: Senator Sean Mahoney of New York introduced an amendment to the Commodity Exchange Act that would require any designated contract market or swap execution facility that lists a derivatives contract referencing a virtual contract traded on a spot market to have “unconstrained access to all trade and trader data information” related to digital currency on the spot market platform and the “capability” to provide the data to the CFTC upon request. The proposed law provides no insight as to what might constitute unconstrained access or an adequate capability.