The SEC has fined the founders of ICOrating.com, a site that rates popular ICOs, for engaging in fraudulent activity. According to the agency, the site published listings that were not impartial and were influenced by ICO issuers even though it claimed otherwise. The impartial listings violated anti-touting provisions for offerings.
Paid Advertisements and Anti-Fraud Laws
ICOrating.com’s site is down, as of this writing. On its social media account, however, the company describes itself as “an analytical agency that delivers independent, non-affiliated research of the crypto market.” But the SEC found otherwise.
The federal agency alleges that the Russia-based site was paid up to $100,572 in fees by various ICO issuers between December 2017 and July 2018. The ratings for these offerings were paid advertisements but the site did not make full disclosure of this fact to visitors. It is not clear if the token issuers also supplied content for the supposedly-unbiased reviews.
According to the company’s Crunchbase entry, it has three employees and earned an estimated $310,000 in revenue in the last year alone. Payments made to the site could also have violated anti-fraud laws because the company took part part in an unregistered sale and took on the role of an unregistered broker in touting specific investments.
“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. This requirement applies regardless of whether the securities are being issued using traditional certificates or on the blockchain,” stated Melissa Hodgman, Associate Director of the SEC’s Enforcement Division.
Last week, SimplyVital Health Inc. settled with the SEC after the SEC accused them of conducting an unregistered ICO during which they raised $6.3 million. The company settled the lawsuit without confirming or denying whether they had broken any federal laws and agreed to the terms of the SEC’s cease-and-desist order.