The United States Securities and Exchange Commission (SEC) announced a hefty fine of nearly $4 million against Coinme, a crypto exchange. The allegations stated that the exchange offered unregistered securities and made misleading statements regarding its digital token, UpToken (UP).
The SEC settlement charges were levied against Coinme, its subsidiary Up Global SEZC, and Neil Bergquist, the CEO of both firms. The companies agreed to pay a combined penalty of $3.52 million, while separate fines of $250,000 and $150,000 were imposed on Coinme and Bergquist, respectively.
The SEC argued that Coinme, Up Global, and Bergquist’s ICO of UP between October to December 2017 was an investment contract under the Howey test and an unregistered securities offering.
The ICO was organized to expand the number of Bitcoin ATMs in Coinme’s fleet, and it raised around $3.6 million. Holders of UP were compensated with advantages including reduced costs and a 1% payback paid in UP while using the ATMs.
To ease cash-to-crypto transactions instead of using its own ATMs, Coinme teamed with Coinstar in January 2019 and changed its offering. As a result, Coinme shut down all of its ATMs by July 2019.
The SEC accused Bergquist and Up Global of making false and misleading statements about the demand for UpToken and the amount raised in the ICO.
According to the SEC, Bergquist and Up Global took steps to acquire an UpToken supply, which would reduce Coinme’s need to purchase UpToken after the ICO for the ATM rewards program.
Also Read: Former CFO Gets 3-Year Prison for Crypto & Meme Stock Fraud
Bergquist settled the charges with the SEC without admitting or denying the regulator’s findings. He agreed to pay the fines and was barred from serving as an executive of a public company for three years.
According to the SEC’s ruling, UpToken is currently useless and its holders are no longer eligible for the benefits mentioned in the UpToken offering documents.
Also Read: Bittrex hit with SEC Charges for Operating Unregistered Exchange
