Two ICO Issuers Settle SEC Registration Charges, Agree to Register Tokens as Securities

The Securities and Exchange Commission today announced settled charges against two companies that sold digital tokens in initial coin offerings (ICOs). These are the Commission’s first cases imposing civil penalties solely for ICO securities offering registration violations. Both companies have agreed to return funds to harmed investors, register the tokens as securities, file periodic reports with the Commission, and pay penalties. According to the SEC’s orders, both CarrierEQ Inc. (Airfox) and Paragon Coin Inc. conducted ICOs in 2017 after the Commission warned that ICOs can be securities offerings in its DAO Report of Investigation. Airfox, a Boston-based startup, raised approximately $15 million worth of digital assets to finance its development of a token-denominated “ecosystem” starting with a mobile application that would allow users in emerging markets to earn tokens and exchange them for data by interacting with advertisements.