The U.S. Securities and Exchange Commission (SEC) has fined an ICO analytics firm for failing to disclose payments in return for positive reviews on the platform. Russia-based ICORating settled with the SEC for $268,998 settlement for projects the site rated between December 2017 and July 2018 who raised funds through token sales the SEC classified as the sale of unregistered securities. Because of this, the SEC stated that proper disclosures should have been made to potential investors that they were receiving payment for reviews but ICORating did not do this.
ICO Review Sites Under Scrutiny Again
ICO rating platforms have long been a source of contention among the cryptocurrency community, with suspicions that the whole process is far from above board, with ICOs paying for preferential ratings. One example is the AllForCrypto, something that BitStarz has flagged as a very probable scam, which still managed a rating of 4.1/5 (82%) from 8 ‘expert ratings’ from one ICO ratings website. The SEC seems to share the view that such sites might not quite be as they appear, stating in the ICORating press release:
ICO Rating billed itself as “a rating agency that issues independent analytical research,” and stated that its mission is “to help the market achieve the necessary standards of quality, transparency and reliability.” However, ICO Rating failed to disclose that it was paid by certain issuers whose ICO offerings it rated.
‘Experts’ in Name Only
A June 2018 article on Hackernoon was heavily critical of another ICO rating platform, ICO Bench, after discovering that all that was required to become an “expert” ICO rater was a ₿2 fee, rather than any specific qualifications. The article stated that these so-called experts are happy to pay the fee because they can make the money back by charging for positive ‘expert’ reviews. Suddenly it’s easy to see how scam ICOs like AllForCrypto, among others, can garner such positive reviews and ratings. While of course there is no solid empirical evidence of any ICOs actually doing this for obvious reasons, the circumstantial evidence is almost overwhelming and this SEC fine is probably just the tip of the iceberg in this matter.