Coinme, Up Global, and CEO Pay $4M to Settle SEC Charges Over UP ICO
- The U.S. SEC had alleged that the two companies and their CEO had conducted an “unregistered offers and sales of securities” during their 2017 UPToken ICO.
- The three entities did not confirm or deny the allegations, but agreed to pay close to $4 million to settle the charges, and the CEO is barred from an executive position for three years.
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Cryptocurrency exchange Coinme has agreed to pay close to $4 million to settle charges from the U.S. Securities and Exchange Commission (SEC) that it held an unregistered security offering in 2017, the SEC said in a press release on 28 April.
According to the announcement, the U.S. securities regulator had alleged that Coinme, its subsidiary Up Global SEZC, and the CEO of both companies, Neil Bergquist, offered investors unregistered securities between October and December 2017 through an initial coin offering (ICO) for the UpToken (UP). The three entities agreed to settle the SEC charges, with Up Global paying a $3.52 million penalty, Coinme a $250,000 penalty, and Bergquist a $150,000 penalty.
The SEC order also accused the parties of making “false and misleading statements” regarding the demand for UP — which was supposed to provide its holders with benefits such as discounted fees and 1% cashback when using Coinme’s ATMs — and the amount raised in the ICO. The two companies had claimed during the ICO that they would need to purchase UP from the open market to fund their ATM rewards program, creating a constant demand for the token, but the SEC noted:
“Bergquist and Up Global took steps before and throughout the ICO to obtain an UpToken supply that would substantially reduce Coinme’s need to purchase UpToken after the ICO for the ATM rewards program.”
The SEC also alleged that the two companies used several transactions to “knowingly or recklessly” create an impression of demand for UP tokens. In one example Coinme sent around 160 BTC to an Up Global wallet used to receive funds from the ICO, after which Up Global sent back around 14.5 million UP to Coinme, creating the illusion a third party had made a large purchase.
Coinme, Up Global, and Bergquist neither confirmed nor denied the securities regulator’s allegations, but rather agreed to settle the charges, and cease and desist from future violations of those provisions. The SEC order also barred Bergquist from acting as an executive of a public company for the next three years.
- These documents are seen as central in Ripple’s battle against the SEC, which in 2020 accused the company of selling its XRP token without registering it as a security.
- The documents in question are internal emails, text messages, and expert reports that followed Hinman’s 2018 speech, in which he said ETH and BTC were not securities.
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- The U.S. SEC claimed in its response that it was under no obligation to issue new regulations for crypto, and that rules for crypto were already published and were sufficient.
- The agency also tried to distance itself from any public comments made by its chair Gary Gensler, particularly regarding his statement that most cryptocurrencies are securities.
- The cryptocurrency exchange is estimated to have more than 100,000 creditors, and between $500 million and $1 billion in both assets and liabilities.
- The Chapter 11 filing came less than a month after the U.S. SEC filed charges against Bittrex and its former CEO, claiming they were operating an unregistered securities exchange.