SIA Settles with US SEC Over Unregistered Token Sale
Nebulous ended up paying $225,000 in settlements for a $120,000 unregistered token sale for Siacoin.
Nebulous, the builder of the SIA network, settled with the US Securities and Exchange Commission over an unregistered sale of Siacoin in 2014. The settlement totaled $225,000, over the value of the sale in 2014 at $120,000.
Siacoin by rule produces the SC asset as a utility coin, based on sharing distributed computational resources. But the project adopted a double-token model, issuing Sianotes that were convertible to Siafunds. The new type of asset was seen as an unregistered security by the SEC.
The SEC noted that Nebulous proposed assets that fit the definition of securities. The company proposed an asset named Siastock, which promised future returns.
“Nebulous offered 1,500 SiaNotes, which represented 15% of the outstanding 10,000 SiaNotes. Nebulous intended to hold the remaining 8,500 SiaNotes and later convert them into Siastock. Once converted, Nebulous intended to sell more Siastock to raise money to pay for additional developers, security audits, marketing, and other operational costs to expand its business,” the SEC explained in its settlement notes.
The settlement of Siacoin follows the monetary penalty of Block.One, which agreed to pay out $24 million in settlements for its $4 billion ICO. But for Nebulous and SIA, the settlement was more painful. The project will have to pay $120,000 in disgorgement, prejudgement interest of $24,602, and a civic money penalty of $80,000.
After the settlement, the price of Siacoin (SC) rose slightly, though remaining depressed overall at $0.001. SC traded as high as $0.09 during the bull market in 2017.
The Nebulous team announced the settlement itself, though without admitting fault. The company also evolved its approach, complying with SEC requirements from 2017 onward, explained Zach Herbert, Nebulous Chief Operating Officer.
“Given that Nebulous had properly registered its 2018 offering of Siafunds in the wake of the SEC’s 2017 guidance regarding digital assets, we were disappointed that the SEC chose to take action with respect to the relatively small offering conducted years before we had the benefit of that guidance,” Herbert said.
The SIA network was also known for disabling Bitmain’s ASIC through a hard fork, to boost the share of Obelisk miners built especially to secure the network.