The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Chicago Crypto Capital (CCC) for defrauding investors out of $1.5 million by issuing unregistered BXY tokens during the 2018 ICO boom. .
CCC had offered to sell BXY tokens to investors between August 2018 and November 2019. According to the SEC, none of the defendants were formally registered as brokers.
Defendants allegedly sold BXY tokens to approximately 100 individuals, which allowed the team to raise over $1.5 million. Some investors claimed they did not receive the tokens, and the few who did received the tokens incurred a markup fee.
Young pleaded guilty after paying a settlement with the SEC.
SEC outs on unregistered securities
The SEC is investigating Coinbase for allegedly issuing unregistered tokens to US investors. Coinbase has come under SEC scrutiny following an insider trading incident that identified some of the associated assets as securities.
Bloom Protocol reportedly raised $30.9 million from the sale of BLT tokens during the 2018 ICO boom. As a result, the protocol registered his BLT token with the SEC to avoid a $31 million fine.
Exchanges must be registered to offer securities
According to SEC Chairman Gary Gensler, crypto exchanges that deal in security tokens must register with the SEC.
Gensler added that most cryptocurrency issuances and sales fall under securities laws. As a result, token issuers are required to register for commission before they can sell their tokens.