Key Takeaways
- Quantstamp was accused of conducting an unregistered ICO of “crypto-asset securities.”
- SEC alleges that the company aggressively promoted the potential market growth of the QSP token
Leading blockchain security firm Quantstamp has agreed to put an end to regulatory scrutiny by settling charges following allegations brought by the United States Securities and Exchange Commission (SEC). The California-based company was formally charged on July 21 for conducting an unregistered ICO of “crypto asset securities.”
The SEC’s order revealed that during the ICO held in October and November 2017, Quantstamp managed to raise over $28 million by selling its native QSP tokens to approximately 5,000 investors. The funds were intended to be used for the development and marketing of the company’s automated smart contract security auditing platform.
However, the SEC found that Quantstamp had failed to register its offering and sale of QSP tokens, which the agency classified as securities. The complaint alleges that the company aggressively promoted the potential market growth of the QSP token, leading buyers to expect an appreciation in their token’s value as more smart contracts required security checks.
According to the SEC’s statement, Quantstamp emphasized the “large market potential” of its auditing service, further enticing investors to purchase QSP tokens with the hope of profiting from the company’s success. SEC further argued that the QSP purchasers had a “reasonable expectation of profit from Quantstamp’s efforts”.
Following the ICO, Quantstamp enabled the trading of QSP tokens on various third-party digital asset trading platforms, despite claiming that the unregistered sales were exempt from registration. The SEC, however, refuted these claims, stating that Quantstamp failed to meet the requirements for any exemption.
In response to the charges, Quantstamp chose to settle with the SEC without admitting or denying the agency’s findings. As part of the settlement, the company has agreed to pay nearly $2.5 million in disgorgement and prejudgment interest, in addition to a $1 million civil penalty.
