The Global Banker

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Blockchain security firm Quantstamp has recently reached a settlement with the U.S. Securities and Exchange Commission (SEC) in relation to an unauthorized initial coin offering (ICO) held in 2017. The SEC filed charges against Quantstamp, alleging that the company conducted an unregistered ICO that raised $28 million through the sale of crypto asset securities. As part of the settlement, Quantstamp will be required to reimburse the ICO proceeds and pay fines imposed by the SEC.

In October and November 2017, Quantstamp successfully raised over $28 million by selling “QSP” tokens to approximately 5,000 investors worldwide, including those based in the United States. The funds were intended to be used for the development and marketing of an automated smart contract security auditing platform. However, the SEC discovered that Quantstamp had failed to register its offers and sales of QSP, which were classified as securities.

Despite filing a Form D claiming exemption under Rule 506(c) of Regulation D and Regulation S, Quantstamp’s unregistered sales of QSP did not qualify for any exemption. The SEC found that Quantstamp had emphasized the potential market value of its smart contract security auditing product, creating an expectation among QSP purchasers that the value of their tokens would increase alongside the success of Quantstamp’s enterprise. Additionally, the company had taken steps to make the tokens available for trading on third-party digital asset trading platforms post-ICO.

As a result of the SEC’s investigation, Quantstamp has agreed to settle the regulatory violations. The settlement requires the company to pay a disgorgement fee of $1,979,201, prejudgment interest of $494,314, and a civil penalty of $1 million. Furthermore, a Fair Fund will be established to return the funds paid by Quantstamp to affected investors. The company must also transfer all remaining QSP in its control to the Fair Fund administrator, where they will be permanently disabled or destroyed.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The NFT and cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.

The post “Quantstamp Settles With SEC Over Regulatory Violations” was published with full copyright permissions obtained from Market Capital Research.