When You’re Paid to Promote, the SEC Requires Transparency

On August 20, 2019, the SEC announced an enforcement action against ICO Rating for violating the anti-touting provisions of Section 17(b) of the Securities Act of 1933. While these anti-touting rules apply to all securities, in this case the SEC was again flexing its muscle in the arena of token and coin offerings. 

According to the SEC press release, ICO Rating was promoting certain blockchain-based digital asset securities without disclosing that it was receiving compensation from issuers for publicizing these offerings on its website and on social media. In fact, ICO Rating referred to itself as “a rating agency that issues independent analytical research” with a mission of helping “the market achieve the necessary standards of quality, transparency and reliability.” However, ICO Rating failed to inform potential investors that they were viewing a paid promotional product. As part of the SEC’s order, ICO Rating agreed to pay disgorgement and prejudgment interest of $106,998, and a civil penalty of $162,000. 

The SEC press release is available here

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