Regulatory bodies have also kept a close eye on companies involved in the cryptocurrency industry. The main reason for this was the lack of legal clarification and the growing number of fraudulent activities in the region.
Another cryptocurrency organization was recently put to the sword when BitClave, a California-based startup, was paying all its customers back to the US Securities and Exchange Commission [SEC]. Charges were filed against BitClave for conducting an unregistered ICO back in 2017.
BitClaive’s first shot to fame when it raised over $25 million from more than 9,500 investors before the Bitcoin bull ran three years ago. Once the SEC clamped down on the Ethereum-based search engine, things moved pretty quickly to the legal front. BitClave neither confirmed nor denied the illicit aspects of the ICO and agreed to comply with SEC’s orders.
According to the SEC, BitClave will pay back all its customers through a Fair Fund established just for this purpose. The startup had raised the vast capital by selling its native Consumer Activity Token or CAT. The investors were told that BitClave would use the money to develop, administer, and market a “blockchain-based search platform for targeted consumer advertising. A release from the SEC said:
“ BitClave emphasized its expectation that the tokens would increase in value, and took steps to make the tokens available for trading on third-party digital asset trading platforms after the ICO. The order finds that BitClave failed to register their offers and sales of CAT, which constituted securities. CAT has since been removed from many of the third-party trading platforms, and BitClave is currently winding down its operations and does not plan to continue developing or supporting the platform. “
Kristina Littman, the Chief of the SEC Enforcement Division’s Cyber Unit added that all issuers of securities must follow the rules charted down by the federal body. The SEC also reiterated its mission to protect the people and their assets at all costs. The SEC pointed out that CAT tokens were indeed investment contracts because of what was mentioned in the token’s whitepaper.
The CAT whitepaper had told users that as more service providers join the platform, the value of CAT tokens would appreciate. As it stands, the SEC has ordered BitClave to transfer 1.32 billion uncirculated CAT tokens so that they can be taken off the markets. Almost all major cryptocurrency exchanges have removed the token from their platforms, save a few that is expected to follow suit soon.