Illegal ICO Escapes Unscathed
In a surprise turn of events, the Securities and Exchange Commision (SEC), has stated their decision to forgo imposing penalties upon Gladius Network LLC.
Gladius Network has been under investigation by the SEC since the company took steps to both self-report, and remedy their actions.
The ICO in question took part in 2017, with Gladius Network selling $12.7 million USD worth of ‘utility tokens’. At the time, this fund raising event was completed under the guise that the funds would be used to develop the Gladius product. This product was intended to utilize blockchain to create a network which rents out unused computer bandwidth, with the intent to enhance cybersecurity.
A Return of Funds
The only enforced action of note to come from this process, is for Gladius Network to return the funds garnered through the ICO process. In addition to the return of funds, Gladius Network must also register with the SEC – allowing for the required levels of transparency.
While Gladius Network remains operational to date, it is unclear what effect these impositions will have on the company. Will the loss of funds, and need for transparency, put a wrench in their operations? Or is this simply a hiccup for a promising start-up?
Along with their decision to forgo penalties, representatives from the SEC commented on the development.
It was stated,
“[Gladius] self-reported to the SEC’s enforcement staff in the summer of 2018, expressed an interest in taking prompt remedial steps, and cooperated with the investigation.”
Robert A. Cohen of the SEC continued,
“[The SEC] has been clear that companies must comply with the securities laws when issuing digital tokens that are securities…today’s case shows the benefit of self-reporting and taking proactive steps to remediate unregistered offerings.”
Setting a Precedent
Some worry that this turn of events may set a bad precedent for other ICOs. It essentially opens an avenue to escape punishment.
This avenue, however, may be viewed in a positive light from both the perspective of the SEC and offending parties. The SEC does not have endless resources. With this in mind, they may welcome the idea of not needing to prosecute the hundreds of offenders on their radar. Of those that hosted ICOs, many have petitioned for exemptions due to unclear regulatory guidelines. They may now have an ‘out’ to escape persecution.
The Unfortunate Ones
The events discussed here are a first. Gladius Network remains an exception to date, rather than the rule. Below are a few articles detailing events surrounding ICOs that have experienced the wrath of the SEC in recent months.