Gladius LLC Avoids SEC Penalty Despite Issuing Security Tokens Illegally

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Gladius LLC Avoids SEC Penalty Despite Issuing Security Tokens Illegally

No Penalty For Illegal ICO

The U.S. Securities and Exchange Commission (SEC) has decided not to impose a fine on a business that had actually provided security tokens without its approval and without getting approved for an exemption. The business raised approximately $12.7 million.

Gladius LLC  Breathes Sigh Of Relief For Lack Of Punishment

The SEC revealed on Wednesday that it did not enforce a penalty on Gladius Network Llc despite the fact that the company has been charged with carrying out an initial coin offering (ICO). The agency stated in its order:

The Commission is not imposing a penalty because of the significant steps Gladius took to remediate the violation.

Company Evades SEC Penalty Despite Illegally Issuing Security Tokens

The SEC order details that Gladius conducted the ICO in late 2017 after they warned about security token offerings in its DAO report. The Washington D.C.-based company raised approximately $12.7 million worth of ether “to finance its plan to develop a network for renting spare computer bandwidth to defend against cyber attacks and enhance delivery speed,”  the agency explained. The ICO was neither registered with the SEC nor qualified for an exemption.

Self-Reporting

Gladius, a Nevada Llc, “self-reported to the SEC’s enforcement staff in the summer of 2018, expressed an interest in taking prompt remedial steps, and cooperated with the investigation,” the SEC detailed.

Noting that the Commission “has been clear that companies must comply with the securities laws when issuing digital tokens that are securities,” Robert A. Cohen, Chief of the SEC’s Cyber Unit emphasized that “Today’s case shows the benefit of self-reporting and taking proactive steps to remediate unregistered offerings.”

Company Evades SEC Penalty Despite Illegally Issuing Security Tokens

According to the SEC, Gladius has accepted return funds “to those investors who bought tokens in the ICO and request a return of funds, and register its tokens as securities pursuant to the Securities Exchange Act of 1934.” The business will likewise file a periodic report with the SEC. “Gladius consented to the order without admitting or denying the findings,” the SEC wrote.

In contrast, the SEC enforced charges on 2 companies in November in 2015 for similar registration violations. Carriereq Inc. (Airfox) and Paragon Coin Inc. were ordered to pay $250,000 civil money charge each to the SEC for transfer to the basic fund of the United States Treasury.

A ‘Terrible Example’

After the SEC’s statement, Gabor Gurbacs, Director of Digital Assets Strategy at Vaneck and its subsidiary MVIS, commented:

This is actually a terrible example. The guy did an unregistered offering. Self-reported it. No penalties. Miraculously got away with it. No-one knows why … It’d be much more useful from regulators to establish a safe-harbor for tokens with specific parameters.

Vaneck has a proposed rule modification submitted with the SEC for the Vaneck Solidx bitcoin exchange-traded fund (ETF) which will be noted and traded on the Cboe BZX Exchange. It was submitted on Jan. 30 and published in the Federal Register on Feb. 13.

Should The SEC Have imposed a penalty on this company? 


Images courtesy of Shutterstock.

The post Company Evades SEC Penalty Despite Illegally Issuing Security Tokens appeared first on Bitcoin News.

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