U.S Securities and Exchange Commission has hit Paragon and Airfox with a fine of $250,000. The fine stems from accusation that the two firms offered digital tokens in a manner that violated securities rules.
The two Initial Coin Offering Firms were at the center of digital token offerings last year. Similarly, they went on to raise over $27 million the token offerings. Boston based Airfox raised about 15 million worth of digital assets last year. The firm insists the money went on to develop its token-denominated ecosystem.
Similarly, Paragon raised $12 million worth of digital assets for the development and implementation of its business plan. The company also says part of the funds financed the development of a blockchain technology for the cannabis industry
As part of a settlement agreed with the SEC, the two firms must repay millions of Dollars in ICO revenues to investors. The two must also pay a $250,000 civil money penalty as the first installment, due within the next 30 days.
?We wish to emphasize [?] that market participants must still adhere to our well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated form or using new technologies, such as blockchain,? representatives wrote,? SEC representative in a statement.
SEC Cryptocurrency Regulation
Paragon and Airfox join a growing list of cryptocurrency-focused firms that have fallen foul of securities regulations. A number of companies have come under immense scrutiny in the recent past. The SEC has since ramped up its oversight of the burgeoning cryptocurrency marketplace.
Similarly, the SEC has started treating token offerings the same way it treats Security offerings. The increased scrutiny seeks to protect the public amidst growing concerns of frauds in the sector. According to SEC enforcement Chief, Stephanie Avakian, companies that issue digital tokens must adhere to existing security laws.
The issuance of the fines marked the first time that the SEC has dealt with firms violating security laws on ICOs. However, it underscores how focused the agency is on regulating a sector that is still in the early years of development.