Bloom Protocol to Settle with SEC over Unregistered ICO of Crypto Asset Securities

​Fazzaco learned that Bloom Protocol, LLC, a company building an online identity attestation platform, has been charged by the Securities and Exchange Commission (SEC) for conducting an unregistered initial coin offering (ICO) of crypto asset securities.

According to SEC, Bloom would be imposed a springing penalty of up to $30.9 million if the company failed to register the coins and compensate harmed investors.

Background

The SEC's order found that Bloom raised about $30.9 million by offering Bloom Tokens during the period from November 2017 to January 2018 and the funds were used to develop an online identity attestation platform. Besides, the order also noted that the company aims to increase the tokens' value on crypto asset trading platforms with the identity attestation system, so the investors who have bought these tokens would have had a reasonable expectation of future profit.

However, Bloom didn't register the offering of Bloom Tokens or qualify for an exemption even though these tokens it offered and sold constituted securities.

As a result, the SEC confirms that Bloom violated the registration provisions of Section 5 of the Securities Act of 1933. To settle the charge, the company promises to register the Bloom Takens with the commission. Futhermore, it will be fined $300,000 for the violations and an additional penalty of $30.9 million, the same amount of the offering proceeds, would be imposed if it failed to complete the claims and registration processes.

The SEC has been cracking down entities or individuals who violated the registration provisions of the federal securities laws. In early August, the SEC charged convertible note dealer​ and its owners for failure to register.