The United States Securities and Exchange Commission (SEC) has taken action against blockchain security firm Quantstamp for its unregistered initial coin offering (ICO) conducted in 2017, resulting in $28 million raised from approximately 5,000 investors. As a consequence of the charges, Quantstamp has agreed to settle with the SEC and will repay the proceeds from the ICO.
Charges Brought Against Quantstamp and Settlement
On July 21, the SEC formally charged Quantstamp, a California-based firm, for conducting an unregistered ICO that involved the sale of “crypto asset securities.” The agency’s order emphasized the violation and lack of registration for the QSP tokens offered during the ICO.
Acknowledging the charges brought against them, Quantstamp has agreed to a settlement. As part of the settlement, the company will pay disgorgement of $1,979,201, prejudgment interest of $494,314, and a civil penalty of $1 million. Additionally, the SEC has mandated the creation of a “Fair Fund” to return funds to the affected investors.
Quantstamp will return the $28 million raised during the ICO to investors as part of the settlement. The company will cooperate with the Fair Fund administrator to ensure a fair and transparent process. Furthermore, to ensure accountability, Quantstamp will transfer its own QSP token holdings to the administrator, who will then permanently disable or destroy them.
Quantstamp’s ICO and its Purpose
During October and November 2017, Quantstamp’s ICO generated significant interest, raising over $28 million. The company intended to utilize the ICO proceeds to develop and market its automated smart contract security auditing platform. The SEC found that Quantstamp had emphasized the potential of its service, leading buyers of QSP tokens to anticipate an increase in token value.
Since June 2019, Quantstamp has discontinued its active support for the automated smart contract security auditing platform. This marks a shift in the company’s focus and approach.