Initial Coin Offerings (ICOs) on SEC’s Radar

Full disclosure: I have been involved in a number of blockchain-based startups in the past couple of years so I’ve seen first-hand the chilling effect of the regulatory interest in ICOs (lately called Initial Security Offerings /ISOs)…:

This month, the Securities and Exchange Commission (SEC) announced that it has entered into a settlement with SimplyVital Health, Inc., a blockchain company that offered and sold approximately $6.3 million worth of securities to the public. The SEC alleged that the plan to conduct an initial coin offering (ICO) to raise money to develop a “healthcare-related blockchain ecosystem” was done without proper registration with the SEC.

According to the SEC’s Order, SimplyVital Health, Inc. publicly announced its plan for the token sale and offered a new token called Health Cash or HLTH, to be used as currency in its Health Nexus. “SimplyVital concurrently announced that it would conduct a ‘re-sale’ of its HLTH tokens, in which it offered investors Simple Agreements for Future Tokens, or SAFTs, under which it sold HLTH tokens that would not be delivered to investors unless and until created by SimplyVital. The order finds that SimplyVital did not file a registration statement with the Commission or qualify for an exemption from registration before offering and selling HLTH to the public through the SAFTS.” The failure to register violated the registration provisions of Section 5(a) and (c) of the Securities Act of 1933.

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