US SEC Issues Cease and Desist Against ICORating.com
The service, which profiled ICOs during the peak of token sales, did not register with the SEC and may have influenced buyers to invest in risky tokens.
The US Securities and Exchange Commission once again went after the ICO sector, this time by targeting aggregator and review site ICORating.com. The site used an unofficial rated system to estimate the potential of token-based startups, and according to the SEC, never registered for its role. The procedure also requires the company to pay a series of fines, including disgorgement of $100,572, prejudgment interest of $6,426, and civil money penalty of $162,000.
ICORating operated between December 2017, the peak of the bull market, and July 2018, when the ICO sector slowed down significantly. During that time, not all ICOs were permitted to operate on the US market. Still, the SEC noted that most of the traffic of the ICORating.com site came from US-based visitors.
The SEC’s Cease and Desist order was based on the conclusion that the ratings service went way beyond merely listing ICOs. The site received consideration and actively publicized token sales, including through its social media profiles:
“ICO Rating’s research reports, ratings, and social-media postings publicized offerings of blockchain-based digital assets, including “tokens” or “coins” that were investment contracts, which are securities pursuant to Section 2(a)(1) of the Securities Act,” explained the Commission.
The US SEC determined the activity of the firm to be breaking laws against touting assets that were also unregistered securities.
The US SEC has, until now, targeted ICOs directly, but the move against a rating company and the discovery that the profiles were paid is moving the investigations to a new page. Multiple startups appeared during peak ICO activity, which boosted the visibility of projects.
The ICO sector shrank markedly after the summer of 2018, coinciding with the closing of ICORating.com. Since then, both the number of ICOs and funds raised shrank significantly. In 2019, only 84 ICOs were held until August, with almost no activity in the past two months. But back in 2018, 1,253 ICOs raised more than $7.3 billion’s equivalent.