November 29, 2020

Volume X, Number 334

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Another One Bites The Dust - SEC Charges Issuer and CEO in Fraudulent ICO

The U.S. Securities and Exchange Commission (SEC) recently announced charges against Boon.Tech and its chief executive officer for fraud and registration violations in connection with a $5 million initial coin offering (ICO) of digital asset securities. This case is the most recent example of the SEC’s continuing focus on ICOs that are illegal offerings of securities.

From November 2017 to January 2018, Boon.Tech and the CEO of the company raised approximately $5 million selling Boon Coins to investors in the U.S. and worldwide.  The Boon Coins were offered and sold as investment contracts and were therefore securities.  Boon.Tech and the CEO of the company failed to register the securities and the securities did not qualify for an exemption from registration with the SEC.  

The CEO and the company were charged with fraud for making false and misleading statements as part of the offering. The SEC also alleges Boon.Tech and the CEO claimed the company used patent-pending technology to hedge Boon Coins against the U.S. dollar eliminating the volatility inherent in the digital asset market

Without admitting or denying the SEC’s findings, Boon.Tech and the CEO agreed to settle the charges by consenting to the issuance of an order, which requires the company to disgorge the $5 million raised in the ICO plus interest of $600,334.  Boon.Tech and the CEO were required to destroy all Boon Coins in the company’s possession, to request Boon Coins be removed from trading on third-party digital asset trading platforms, and to refrain from participating in any future offerings. The CEO was required to pay a $150,000 penalty and was barred him from serving as an officer or director of a public company.

The settlement with Boon.Tech more than likely includes penalties that are more severe than other ICO settlements with the SEC because this case included allegation the defendants committed fraud in addition to the failure to register the securities with the SEC.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume X, Number 244
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About this Author

Richard Levin Polsinelli Fintech Attorney
Shareholder

Richard Levin is the Chair of Polsinelli’s Chambers rated FinTech and Regulation Practice.  He brings his experience as a senior legal and compliance officer on Wall Street and in London to bear in advising clients on corporate, securities and regulatory issues. A problem-solver by nature, his practice focuses on helping financial services and technology (FinTech) clients identify and address regulatory issues as they build their businesses.

The FinTech sector is...

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Jason A. Nagi, Polsinelli, Distressed note purchases lawyer, Real estate matters attorney
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Jason Nagi helps clients find the most efficient route to their desired result and clients have relied on him to get them what they need – in and out of the courtroom – for more than a decade.

He has significant experience representing parties involved in the following matters:

  • Foreclosing lenders realizing on their collateral

  • Distressed note purchases

  • Real estate

  • Related bankruptcy and out-of-court...

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Paul Roshka, Polsinelli, financial securities lawyer
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Known for his thorough preparation and persistence, Paul Roshka has a national practice representing companies, their directors, officers, and employees during investigations and enforcement/disciplinary proceedings involving potential violations of the federal and state securities laws, and other financial regulatory statutes and rules. He has handled matters initiated by almost every SEC Regional Office and FINRA District Office, and their Home Offices in Washington, D.C.

He is also a recognized bet-the-company litigator. Paul has defended securities/financial...

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