Two blockchain startups will each be $250,000 poorer after settling with the Securities and Exchange Commission over their selling digital tokens in initial coin offerings.
The companies will also have to refund investors and register their tokens as part of the settlement, the SEC announced Friday. The cases were the first leading to civil penalties for ICO securities registration violations, the regulator said.
The SEC said CarrierEQ (Airfox) and Paragon Coin had not registered the ICOs as they should have under federal securities law; nor did they qualify for an exemption to registration requirements. The companies conducted the ICOs in 2017 after the SEC determined that ICOs can be securities offerings.
Boston-based Airfox, which raised $15 million in tokens, allows users to send and borrow money and earn tokens in exchange for interacting with video and other advertising. Paragon, which is working on a blockchain to improve services in the cannabis industry, raised $12 million in digital assets.
Besides the fine, Airfox and Paragon Coin will have to file reports to the SEC for a year. Neither company admitted or denied any wrongdoing.