The U.S. Securities and Exchange Commission (SEC) recently announced charges against Boon.Tech and its chief executive officer for fraud and registration violations in connection with a $5 million initial coin offering (ICO) of digital asset securities. This case is the most recent example of the SEC’s continuing focus on ICOs that are illegal offerings of securities.

From November 2017 to January 2018, Boon.Tech and the CEO of the company raised approximately $5 million selling Boon Coins to investors in the U.S. and worldwide.  The Boon Coins were offered and sold as investment contracts and were therefore securities.  Boon.Tech and the CEO of the company failed to register the securities and the securities did not qualify for an exemption from registration with the SEC.  

The CEO and the company were charged with fraud for making false and misleading statements as part of the offering. The SEC also alleges Boon.Tech and the CEO claimed the company used patent-pending technology to hedge Boon Coins against the U.S. dollar eliminating the volatility inherent in the digital asset market

Without admitting or denying the SEC’s findings, Boon.Tech and the CEO agreed to settle the charges by consenting to the issuance of an order, which requires the company to disgorge the $5 million raised in the ICO plus interest of $600,334.  Boon.Tech and the CEO were required to destroy all Boon Coins in the company’s possession, to request Boon Coins be removed from trading on third-party digital asset trading platforms, and to refrain from participating in any future offerings. The CEO was required to pay a $150,000 penalty and was barred him from serving as an officer or director of a public company.

The settlement with Boon.Tech more than likely includes penalties that are more severe than other ICO settlements with the SEC because this case included allegation the defendants committed fraud in addition to the failure to register the securities with the SEC.