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SEC Slaps Crypto Firm with $50,000 Fine for Selling Unregistered Securities

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The Securities and Exchange Commission (SEC) issued a cease-and-desist order against a crypto investment fund for distributing unregistered securities. The US securities regulator also slapped CoinAlpha Advisors LLC, a Delaware-based blockchain financial products company, with a $50,000 fine.

According to the SEC order, CoinAlpha declined to register its business, which involved investing in and distribution of crypto assets, as required by federal law. The company, according to the SEC notice, had applied for a distribution license exemption, but it didn’t fit the criteria for approval. Despite that, CoinAlpha engaged itself in the activities that violated the specification of the US federal law.

“Respondent filed a Form D Notice of Exempt Offering of Securities with the Commission on November 3, 2017,” the SEC order read. “CoinAlpha did not file or cause to be filed a registration statement with the Commission, and no exemption from registration was available for the securities offering during the Relevant Period.”

The SEC also found that CoinAlpha did not take sufficient measures to ensure that all its investors were accredited. The company solicited these investors through its official website, and also via blog postings, media interviews, and digital asset and blockchain conferences. As the negligence took place, a total of 22 investors had already invested $608,491 in the CoinAlpha’s crypto fund. However, when SEC staff reached the CoinAlpha office, the company obliged and liquidated its fund.

“[CoinAlpha] further voluntarily reimbursed all fees it had already collected, surrendered all rights to future management and incentive fees unwound the Fund, and made payments to ensure that no Fund investor suffered a loss,” the SEC explained. During the Commission staff’s investigation, Respondent retained a third party who determined that all 22 investors were accredited.”

Since CoinAlpha complied with the SEC regulations after it received the notice, the US securities regulator imposed a minimal punishment on the company, which included a fine — as mentioned above — and return of funds to its rightful investors. While CoinAlpha has agreed to comply by the cease-and-desist order, it hasn’t admitted or denied the SEC’s findings against it.

The SEC, meanwhile, continues to show its seriousness towards regulating the crypto space in the US. Earlier, The regulator took action against ICO startups AirFox and Paragon, which also distributed their tokens as securities without a license. It also charged the developers of EtherDelta, a decentralized exchange, with facilitating the trading of unregistered securities on their platform, confirming that even exchanges with minimal off-chain activity were under their purview.

Read the full order below:

SEC — CoinAlpha Order by CCN on Scribd

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