Quantstamp Agrees to $3.5 Million SEC Securities Fine

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  • The Securities and Exchange Commission has charged Quantstamp, Inc. for conducting an unregistered ICO of crypto asset securities.
  • Quantstamp has settled the charges by disgorging proceeds from the offering and paying a civil penalty.
  • The SEC was looking for a win following its defeat to Ripple

Blockchain security firm Quantstamp has agreed to hand back the $28 million it raised during a 2017 ICO following charges by the Securities and Exchange Commission (SEC). The SEC was desperately seeking a win regarding its conjecture that all cryptocurrencies are securities and it seems to have found it, with Quantstamp also agreeing to pay a $3.5 million fine over allegations that its sale of QSP tokens constituted a sale of securities. In agreeing the deal, Quantstamp has not admitted or denied the allegations.

Quantstamp Failed to Achieve Exemptions

The Quantstamp ICO took place in October and November 2017 and raised over $28 million from approximately 5,000 investors, including U.S. investors. Quantstamp had sold QSP tokens to fund the development and marketing of its automated smart contract security auditing platform, emphasizing the potential success of the product. This, the SEC argues, led investors to expect token value appreciation.

Quantstamp failed to qualify for either of the two exemptions it filed for and did not register the sale of QSP tokens, which the SEC therefore considered securities.

Quantstamp Agrees to ICO Repayment and Fine

In settling the charges, Quantstamp agreed to a cease-and-desist order and to disgorge $1,979,201 in proceeds from the offering, along with $494,314 in prejudgment interest, and a civil penalty of $1 million. The company will establish a Fair Fund to compensate injured investors and transfer all remaining QSP tokens to the Fair Fund administrator for permanent disablement or destruction.

Quantstamp has also agreed to publish notice of the SEC’s order on its website and inform crypto trading platforms that offer QSP trading of the ruling.