A cryptocurrency exchange platform that specializes in managing initial coin offerings, commonly abbreviated as ICOs, has been charged by the United States Securities and Exchange Commission for alleged violations related to unregistered securities. The SEC lawsuit names ICOBox and its founder as defendants. Nikolay Evdokimov and the directors of ICOBox will now have to answer to charges of illegally managing investment securities and failing to register as brokers.
According to the SEC press release about this incident, ICOBox has facilitated various ICO transactions that resulted in more than $650 million collected from prospective investors speculating on the future value of new cryptocurrencies. One specific token mentioned in the lawsuit is ICO, which was developed by the trading platform and was sold to at least 2,000 investors a couple of years ago.
The sales pitch used by ICOBox to promote the company's own token involved suggesting that ICO would become a valuable cryptocurrency by virtue of its utility and the work of the business development team at ICOBox. Investors would then be able to use ICO to purchase other tokens traded on the platform, which are also "alt-coins" just coming on the market without circulation.
The SEC goes on to say that the defendants claimed that the tokens would increase in value upon trading and that ICO token holders would be able to purchase other tokens traded on the platform, which are similar alt-coins without circulation or proven track record. By the estimates of the SEC, the ICO exchange rate has dropped to zero despite investors having shelled out more than $14 million.
Before the SEC cracked down on ICOBox, the company had managed the launch of various digital currencies, none of them rising to the market capitalization levels of Bitcoin, Ethereum, Ripple, or even Monero. The problem with this operation is that the alt-coins were offered as investment securities, but prospective investors were not provided with the requisite disclosures to help them make informed decisions.
Should the SEC complaint prevail in court, ICOBox would be ordered to shut down operations. Moreover, regulators may seek some level of restitution to investors, and the company would be subject to monetary penalties. Things could get complicated for ICOBox because the SEC recently approved the initial offering of Blockstack, a blockchain token that made history as the first digital currency to be offered with the blessing of a federal regulator.