Ontario Securities Regulator Settles With ICO Promoter CoinLaunch for CAD 50,000
CoinLaunch reportedly created the tokens, white papers and websites, advised on the sale structure and made introductions, which was found to be an act beyond the trade of the security tokens.
The cryptocurrency consulting firm has agreed to pay more than CAD 50,000 (approximately $38,000) in penalties, profits, and legal fees as part of the agreement. The firm is also prohibited from acquiring or trading securities for five years.
The OSC’s official statement of allegations asserts that
CoinLaunch engaged in and held itself out as engaging in the business of trading in securities, without registration under Ontario securities law and where no exemption from the registration requirement was possible.
A public settlement hearing is scheduled for July 24 to determine whether the settlement aligns with public interest.
The Ontario Securities Commission took action against CoinLaunch Corp for failing to register with the regulator despite trading in securities. The company also offered promotional services to initial coin offerings between March 1, 2018 and Sept. 30, 2018.
Through its promotional services, CoinLaunch Corp assisting in launching two other tokens deemed to have comprised the unlicensed distribution of securities - Buggyra Coin, was launched by an off-road truck racing team based in the Czech Republic, and EcoRealEstate token, a sale that sought to raise capital to finance the purchase and development of a village resort in Portugal.
The OSC also notes that the company significantly altered its business model over time, having initially operated a platform allowing users to create and issue tokens on the Ethereum blockchain after launching during October 2017, before transitioning to provide services to initial coin services in March 2018. The OSC indicated that CoinLaunch is currently winding down to cease operations.
Evan Thomas, a Toronto-based lawyer, stated that “taken as a whole [...] CoinLaunch’s marketing program [...] was instrumental in soliciting investors to buy these tokens,” resulting in the firms’ actions falling under the OSC’s definition of “trading.”
Mr Thomas also noted that the “lack of similar cases seems to have helped CoinLaunch in terms of reducing [its] penalty.” The OSC statement asserted that the penalty was “reasonable” given “the limited history of penalties for non-registration cases involving cryptoassets.”
Under the agreement, CoinLaunch will also render the Buggyra Coin and EcoRealEstate tokens given to the firm unusable by deleting its private keys allowing the company to access said tokens.
CoinLaunch was targeted as part of a wider crackdown on companies operating with virtual currencies seen to be distributing unlicensed securities by the OSC.
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