AirToken’s price has just experienced a huge surge, over 70% in a matter of two hours. The cryptocurrency’s price spiked soon after the U.S. Securities and Exchanges Commission (SEC) ordered the company (Airfox) along with Paragon to refund all of their investors. As of now, the gains have decreased to 25%.
Not complying with the federal securities laws
According to the federal agency, both companies conducted their Initial Coin Offerings in 2017 despite the SEC’s warning that the organizations’ tokens are considered as securities, which are defined in the DAO Report of Investigation.
The Boston-based Airfox collected approximately $15 million of funds from investors to finance the startup’s development of a token-denominated ecosystem, which starts with a smartphone app that allows users in emerging markets to earn tokens, exchange the cryptocurrencies to data while interacting with ads.
The SEC emphasized that neither Airfox nor Paragon registered their ICOs, failing to comply with the federal securities laws in the United States. According to the federal agency, neither companies qualified for an exemption to the registration requirements.
“We have made it clear that companies that issue securities through ICOs are required to comply with existing statutes and rules governing the registration of securities. These cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets,” Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, said.
Steven Peikin, Co-Director of the SEC’s Enforcement Division, stated that the SEC’s orders, in which the two companies have to refund their investors and register their tokens with the federal agency, provides “a model for companies that have issued tokens in ICOs and seek to comply with the federal securities laws.”
Along with the federal agency’s orders to refund investors and register their tokens, the SEC imposed $250,000 penalties against both Airfox and Paragon. Furthermore, the two organizations have to file periodic reports with the SEC for at least one year. According to the federal agency, both Airfox and Paragon have consented to the SEC’s orders without admitting or denying the findings.
Another recent case by the SEC
Yesterday the Wall Street Journal published an article stating that the SEC subpoenaed the crypto lending firm SALT Lending along with ShapeShift CEO Erik Voorhees. According to the WSJ, the federal agency launched an investigation against the company since the tokens issued during SALT’s $50 million ICO could be considered as securities. As SALT’s tokens are not registered with the SEC, the federal agency could find them as non-compliant securities, in case they determine the digital currencies as securities after the investigation has finished.
Furthermore, the SEC is also investigating whether SALT has distributed tokens to “insiders” as well as how the company has used the funds they have collected during their ICO. The WSJ, citing anonymous sources that are “familiar with the probe,” states that Voorhees was involved in the case as the ShapeShift CEO was listed as a “director” of SALT before the company conducted its token sale in 2017.