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SEC Brings Charges Against Initial Coin Offering Incubator SEC Brings Charges Against Initial Coin Offering Incubator

SEC Brings Charges Against Initial Coin Offering Incubator

The Securities and Exchange Commission ("SEC") filed charges against ICOBox and its founder (Nikolay Evdokimov) for allegedly conducting an illegal securities offering. According to the SEC complaint, ICOBox and Mr. Evdokimov sold $14 million in a securities offering of ICOBox's digital tokens and acted as an unregistered broker while doing so.

ICOBox raised approximately $14.6 million worth of initial coins in 2017 in an unregistered offering to over 2,000 investors per the SEC's complaint. ICOBox allegedly told purchasers their coins would increase in value and could later be traded for tokens created on the developed incubator platform. Further, ICOBox allegedly acted as a broker, facilitating securities transactions for dozens of clients and raising more than $650 million.

The coins initially sold are now purportedly worthless. The SEC’s complaint charges ICOBox and Evdokimov with violating the registration requirements of the federal securities laws and seeks injunctive relief, disgorgement with prejudgment interest, and civil money penalties.

Regulations related to ICOs and digital coins sales are evolving rapidly. The SEC published a "Spotlight on Initial Coin Offerings" in April 2019 (found here). Coin exchanges can easily run afoul of registration and brokerage guidance and requirements. Anyone considering offering an ICO or creating an exchange for the sale of coins or digital tokens should consult with legal professionals prior to doing so.

Please contact Erik Hansen or another member of our Business Group if you have any questions.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

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