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SEC Charges ICO Rating Service for Failing to Disclose Paid Advertisements
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Russian-based ICO Rating has been forced to pay $268,998 for failing to disclose that it received money from token issuers to rate their ICOs.
ICO Rating has been asked by the SEC to pay a hefty pain for failing to make clear that the company was getting paid to post reviews. The ICO company promoted itself as a “rating agency that issues independent analytical research.”
However, these ICO ratings were, in fact, not objective. They were paid. The rating company also oftentimes reviewed tokens which were securities, and published this content on their website.
According to Melissa Hodgman, Associate Director of the SEC’s Enforcement Division:
“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 being touted are issued using traditional certificates or on the blockchain.”
The SEC found that ICO Rating violated Section 17(b) of the Securities Act of 1933. ICO Rating was to pay a disgorgement and prejudgment interest of $106,998, and a civil penalty of $162,000. The penalty covers the company’s activities from December 2017 to July 2018.
A few days ago, SimplyVital Health settled with the SEC for its $6.3M illegal ICO. The regulatory agency has urged token issuers to conduct STOs instead of ICOs which are unregulated securities.
Do you believe that other ICO rating companies could face SEC penalties as well? Let us know your thoughts below in the comments.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
