Veritaseum settles with SEC for $9.5 million

Blockchain startup Veritaseum has settled with the Securities and Exchange Commission (SEC) over its 2017 initial coin-offering. Veritaseum needs to pay a total of 9.5 million dollars to settle the case. The SEC announced the settlement on the first of November after coming to an agreement with CEO Reggie Middleton.

The SEC accused Middleton of raising millions of dollars through an initial coin offering without registering his investment plan. In addition he was misleading investors with false information to attract more funds. Middleton didn't admit nor deny the allegations, but he did waive any right to appeal the decision by the court.

During the ICO blockchain startup Veritaseum repeatedly referred to its tokens as software. In addition they compared them to prepaid gift cards, which could be used on a yet to be released platform. The SEC also stated that Middleton used 520 thousand dollars from the Veritaseum ICO for personal use.

In short, Middleton is basically a thief. It's not likely that Veritaseum has any funds left. They needed to hand over their acquired gold bars to the SEC as well. This remains speculation, of course.

SEC hitting hard on initial coin offerings

The SEC has been active in recent months. They have settled with numerous companies behind initial coin offerings. Block.One is the biggest eye catcher because of their 24 million dollar fine. However, the managed to rake in 4.1 billion dollars in 2017 and 2018. The company behind decentralized cloud storage service Sia only needed to pay 240 thousand dollars, which is double of the money gathered in their ICO.

The biggest talk in town is currently Telegram. The SEC ordered to halt their token distribution one day before they would be distributed. They deem the Gram token to be illegal, because Telegram didn't register them as securities. However, Telegram claimed that they’ve been trying to talk to the U.S. Securities and Exchange Commission for 18 months. The SEC and Telegram are currently in talks and will likely settle on a big fine.

‘SEC is killing innovation’

In the past few months we’ve seen the SEC crackdown on a variety of crypto and blockchain projects. The Securities and Exchange Commission already started this last year. The organization first issued enforcement actions to companies that faked business relationships, or used celebrity testimonials.

It’s the Securities and Exchange Commission’s job to maintain a healthy climate for investors. The rise of new currencies and technologies hasn’t made their job any easier. This resulted in criticism from lawmakers and advisory groups.

For example there’s still no clear guidance on cryptocurrencies and investing in or with them. This existing legal framework in the United States is not good enough to cover ICOs and cryptocurrencies. In addition the SEC’s work is ‘killing transformative innovation‘ if they consider every cryptocurrency to be a security.

In April lawmakers introduced the Token Taxonomy Act which wants to exclude crypto from securities laws. The announcement called attention to the growing strength of crypto and blockchain markets in Europe and China. It was said that the Act is needed to keep the U.S. competitive in the global market.