ICO “Listing” Website Charged With Unlawfully Touting Digital Asset Securities
The Securities and Exchange Commission today announced settled charges against the operator of Coinschedule.com, a once-popular website that profiled offerings of digital asset securities. The SEC’s order finds that United Kingdom-based Blotics Ltd. violated the anti-touting provisions of the federal securities laws by failing to disclose the compensation it received from issuers of the digital asset securities it profiled.
According to the SEC’s order, Coinschedule.com was accessible in the United States from 2016 to August 2019, during which time U.S. visitors comprised a significant portion of its web traffic. Visitors to Coinschedule.com were presented with details about each profiled digital token offering in so-called “listing” profiles, which also included links to the token issuers’ own websites and a “trust score” that Coinschedule claimed reflected its evaluation of the “credibility” and “operational risk” for each digital token offering based on a “proprietary algorithm.” In reality, the token issuers paid Coinschedule to profile their token offerings on Coinschedule.com, a fact that Coinschedule failed to disclose to visitors. Coinschedule.com published many of the profiles after the SEC issued its DAO Report in 2017 warning that coins sold in ICOs may be securities and that those who offer and sell securities in the U.S. must comply with federal securities laws, and also after the SEC’s Division of Enforcement and Division of Examinations advised that, in accordance with the anti-touting provisions of the federal securities laws, those who promote a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion.
“As the SEC’s order finds, Coinschedule presented potential investors with seemingly independent profiles about token offerings when in fact they were bought and paid for by token issuers,” said Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit. “The securities law prohibiting touting securities for compensation without appropriate disclosures to investors is clear and longstanding.”
Without admitting or denying the SEC’s findings, Blotics has agreed to cease and desist from committing or causing any future violations of the anti-touting provisions of the federal securities laws, and to pay $43,000 in disgorgement, plus prejudgment interest, and a penalty of $154,434.
The SEC’s investigation was conducted by Kathleen Hitchins and Adam Gottlieb of the Enforcement Division’s Cyber Unit with the assistance of IT Forensics staff Stephen Haupt and Kenneth Zavos, and Office of Market Intelligence staff Jennifer Carr, and was supervised by Paul Kim and Ms. Littman.