SEC takes ICOBox to Court over illegal digital tokens offering
ICOBox raised funds in 2017 to develop a platform for initial coin offerings by selling, in an unregistered offering, roughly $14.6 million of “ICOS” tokens.
The United States Securities and Exchange Commission (SEC) has taken action against ICOBox, a company claiming to be “Blockchain Growth Promoter and Business Facilitator for companies seeking to sell their products via ICO crowdsales”, and its founder Nikolay Evdokimov for conducting an illegal $14 million securities offering of ICOBox’s digital tokens and for acting as unregistered brokers for other digital asset offerings.
According to the SEC’s complaint, ICOBox raised funds in 2017 to develop a platform for initial coin offerings by selling, in an unregistered offering, roughly $14.6 million of “ICOS” tokens to over 2,000 investors.
ICOBox and Evdokimov told investors that the offering proceeds would be used to cover the cost of providing ICOBox’s planned services to digital asset startups that could not afford them. The defendants claimed that ICOBox would be successful—and the ICOS tokens valuable—due to the efforts of ICOBox’s management team, who would curate potential digital asset projects and attract “100+” clients per month. As of the date of ICOBox’s offering, ICOBox had yet to support a single token sale to completion.
According to ICOBox’s promotional materials, the primary benefit to ICOS token holders would be the ability to swap the ICOS tokens through ICOBox’s website for tokens issued by ICOBox’s anticipated clients, at an average 75% discount. ICOBox also emphasized that the ICOS tokens would be immediately transferable and would increase in value when the company placed the tokens on various digital asset trading platforms.
According to the regulator, by not registering the ICOS offering, the company deprived investors of meaningful information that would be found in a registration statement that investors could use to assess the company’s prospects.
ICOBox’s results turned out to be less impressive than its promotional materials forecast. ICOBox has facilitated far fewer than 100 clients’ token sales total—let alone 100 per month. In addition, the company has discontinued the ability to swap ICOS tokens, rendering them useless. ICOS tokens now trade, if at all, at approximately $2.41, a fraction of the offering purchase price.
By actively soliciting and attracting investors to ICOBox’s clients’ securities offerings in exchange for transaction-based compensation without registering as or associating with a registered broker-dealer, the defendants are alleged to have engaged in unregistered broker activities that violated the federal securities laws.
The SEC’s complaint charges ICOBox and Evdokimov with violating the registration requirements of the federal securities laws. The regulator seeks injunctive relief, disgorgement with prejudgment interest, and civil money penalties.
