SEC Issues First ICO Enforcement Action Against a Self-Reporting Token Issuer
February 28, 2019
On February 20, 2019, the Securities and Exchange Commission issued a cease-and-desist order against Gladius Network LLC concerning its 2017 initial coin offering.
The SEC found that the Gladius ICO violated the Securities Act of 1933’s prohibition against the public offer or sale of any securities not made pursuant to either an effective registration statement on file with the SEC or under an exemption from registration. While this is far from the first time that the SEC has found that a particular ICO token meets the definition of a “security” under the Securities Act, this is notably the first action involving an ICO token issuer that self-reported its potential violation. Due to this, and Gladius’s cooperation throughout the investigation, the SEC stopped short of imposing any civil monetary penalties among its ordered remedial measures.
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This article was republished by the Harvard Law School Forum on Corporate Governance and Financial Regulation and Law360.