Unregistered Securities Sales and False Publicity
On the 28th, the U.S. Securities and Exchange Commission (SEC) issued a 5-minute penalty to Coinme, a crypto asset (virtual currency) ATM operator, and related parties, alleging that they had conducted misleading securities offerings and sales without registration. It announced that it had imposed a fine equivalent to 150 million yen ($4 million).
In 2017, Coinme, its subsidiary “Up Global SEZC”, and Neil Bergquist, the CEO of both companies, conducted an ICO (initial cryptocurrency offering) of the unregistered virtual currency “UpToken”. The SEC accused him of not only “making false and misleading statements” about demand and the amount of money raised in the ICO, but also “engaging in fraudulent practices.”
According to the SEC order, Up Global and Bergquist told investors that the price of UpToken will increase due to UpGlobal’s limited supply of UpToken and the constant demand for UpToken from Coinme’s ATM rewards program. was advertising. However, in reality, they manipulated the impression of the quantity of supply and demand through internal transactions between Up Global and Coinme, as well as round-trip transactions with Hong Kong companies.
In addition, both parties advertised that the amount of funds raised by the ICO would be approximately 2.6 billion yen ($18.9 million), but this amount included the above transactions and applied a more favorable exchange rate. The actual amount raised was only about 500 million yen ($3.65 million).
In addition, Coinme will continue to sell UpTokens without registration even after the ICO ends, and purchase UpTokens in secondary markets and private transactions. UpGlobal and Coinme ended up making at least ¥620 million ($4.53 million) worth of net profit from the ICO and subsequent transaction.
fines and suspension orders
Coinme, Up Global and Bergquist have settled with the SEC by neither admitting nor denying the SEC’s allegations, but agreeing to pay fines and cease further illegal activity.
The SEC has fined Up Global 480 million yen ($3.52 million), of which Coinme is jointly and severally liable. Coinme and Bergquist were separately fined ¥34.35 million ($250,000) and ¥20.6 million ($150,000) respectively.
In addition, the SEC order barred Bergquist from serving as an officer or director of any public company for the next three years.
Regarding UpToken and other virtual currencies (securities), the following orders were made:
- Destroy all UpTokens owned by 3 parties within 30 days
- Up Global and Coinme have 10 days to ask relevant cryptocurrency exchanges to delist UpToken
- Up Global and Coinme refrain from participating directly or indirectly in the offering of cryptocurrency securities
- Bergquist refrains from participating directly or indirectly in offerings of cryptocurrency securities for the next three years
Coinme is a Seattle-based company that operates cryptocurrency ATMs. After completing the transaction with Coinme’s app, it is possible to instantly cash and withdraw the virtual currency at the online ATM.
In February of this year, 22,000 new ATMs joined Coinme’s cash network, bringing it to more than 43,000 locations nationwide.
Founded in 2014, Coinme expanded its network in 2019 by partnering with Coinstar. Furthermore, in 2021, it partnered with MoneyGram and began offering bitcoin buying and selling services at its ATMs.
connection:MoneyGram invests in cryptocurrency ATM operator Coinme