Quantstamp, a blockchain security firm, is set to return $28 million raised in a 2017 initial coin offering (ICO) after the U.S. Securities and Exchange Commission charged the California-based firm with "conducting an unregistered ICO of crypto asset securities." The SEC's order requires the establishment of a Fair Fund to return funds to affected investors, and Quantstamp will transfer its QSP token holdings to the Fair Fund administrator, with the tokens set to be permanently disabled or destroyed.
"The SEC’s order finds that Quantstamp violated the registration provisions of the federal securities laws," SEC Chairman Gary Gensler said in a statement, quoted in a BTC News release. "Without admitting or denying the SEC’s findings, Quantstamp agreed to a cease-and-desist order and to pay disgorgement of $1,979,201, prejudgment interest of $494,314, and a civil penalty of $1 million."
On July 21, the SEC declared it had filed formal charges against Quantstamp for holding an unlicensed initial coin offering of "crypto asset securities." Quantstamp consented to resolve the allegations, the SEC reported, accordign to BTC News. The SEC's order noted Quantstamp raised more than $28 million during its initial coin offering, which took place in October and November 2017, by selling its native QSP coins to almost 5,000 investors.
The company sought to "develop and market" its automated smart contract security auditing platform with the money raised from the ICO, the release said. The SEC claimed Quantstamp overemphasized the "large market potential" of its service, which induced QSP buyers to anticipate an increase in the value of their tokens.
Quantstamp reportedly failed to register its offering and sale of QSP tokens, which the SEC considered to be securities, according to BTC News. The commission's decision includes a provision for the creation of a Fair Fund to reimburse impacted investors for their money. The company also consented to give the Fair Fund administrator ownership of the QSP tokens it currently holds, under the condition that they be "permanently disabled or destroyed."
Following its implementation in June 2019, Quantstamp stopped operating and actively supporting the automatic smart contract security audits, BTC News reported. Following the SEC's order, Cointelegraph contacted Quanstamp to inquire about additional information.
