B2B Payments

SEC Fines Russian Rating Firm $269K For Failing To Disclose Review Payments

Initial Coin Offering, SEC, Russia

The Securities and Exchange Commission (SEC) settled with Russia-based ICO Rating for $268,998 to satisfy charges over undisclosed payments received for publicizing companies’ digital asset securities offerings, the SEC said in a press release on Wednesday (Aug. 21).  

The SEC said ICO produced and published research reports and ratings of blockchain-based digital assets between December 2017 and July 2018, but failed to disclose that it was paid by certain issuers. ICO didn’t admit or deny the SEC’s findings.

ICO Rating billed itself as “a rating agency that issues independent analytical research,” and stated that its mission is “to help the market achieve the necessary standards of quality, transparency and reliability.” 

The SEC found that the company violated the anti-touting provisions of Section 17(b) of the Securities Act of 1933. As part of the settlement, ICO agreed to cease and desist from committing or causing any future violations. 

“The securities laws require promoters, including both people and entities, to disclose compensation they receive for touting investments so that potential investors are aware they are viewing a paid promotional item,” said Melissa Hodgman, associate director of the SEC’s Enforcement Division. “This requirement applies regardless of whether the securities being touted are issued using traditional certificates or on the blockchain.”

A pair of U.S. senators are trying to broaden the ability of the SEC to recover (or claw back) money on behalf of investors victimized in financial crimes. Specifically, the legislation from Senators John Kennedy and Mark Warner would extend the statute of limitations tied to those crimes from five years to 10 years. Currently, there is a five-year statute of limitations on fraud or financial misconduct that was put in place by the Supreme Court in 2017.

The new legislation would give the SEC a decade to pursue restitution, where funds recovered would go to the victims. The proposed decade-limitation would give the commission a chance to spot and pursue hard to detect financial crimes, according to the lawmakers.

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