November 16, 2018 / 6:13 PM / 6 months ago

U.S. regulator settles with tech startups over token sale violations

WASHINGTON, Nov 16 (Reuters) - The U.S. Securities and Exchange Commission (SEC) on Friday settled charges with two tech companies for improperly offering digital tokens, mandating that they register their offerings as securities and reimburse investors.

Friday's action marked the first time the regulator has imposed penalties against tech startups that skirt its rules through "initial coin offerings." It also marks a ramping up of the SEC's vigorous oversight of the cryptocurrency space.

The SEC had warned in March that it would hold most token offerings to the same standards as securities offerings, and impose fines on bad actors that violate securities laws.

After raising a combined $27 million from investors, CarrierEQ Inc (Airfox) and Paragon Coin Inc agreed to pay back investors and to each pay $250,000 in fines as part of the settlement, the regulator said in a statement.

Neither of the two companies admitted or denied the SEC's charges, but have both agreed to file periodic reports for at least 12 months.

"These cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets," said Stephanie Avakian, one of the SEC's enforcement chiefs. (Reporting by Katanga Johnson Editing by Tom Brown)

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