Cryptocurrency Issuer Wireline Pays $650,000 to Settle SEC Charges

The U.S. Securities and Exchange Commission (SEC) announced that it has settled charges against financial technology company Wireline, Inc. (Wireline) as the cryptocurrency issuer has agreed to a cease and desist order, to pay a fine of $650,000 that will be used to compensate investors, and to perform undertakings including notifying investors that tokens will not be distributed pursuant to the SAFTs (Simple Agreement for Future Tokens).

Wireline was charged for making materially false and misleading statements regarding an unregistered offer and sale of digital asset securities. The SEC's order finds that, as of 2017, Wireline raised a total of more than $16 million from investors for the purpose of developing a platform or "marketplace" for the development and sale of microservices. 

According to the order, Wireline told investors that it intended to create a digital token that would be used in Wireline's proposed marketplace as the means of exchange between software developers and end-users. In order to raise funds from investors, the company materially misrepresented in its distributed marketing materials the functionality of its platform and the timing of the token distribution. Specifically, Wireline falsely declared that over 100 developers were publishing applications to its marketplace, its platform had been functioning in "private beta" for over 9 months, and that it would distribute tokens in no time. 

Wireline also offered and sold digital assets through SAFTs without registering its offer and sale as required under the federal securities laws or qualifying for a registration exemption. Furthermore, the company never distributed any tokens pursuant to the SAFTs.

The U.S. regulator concluded on the basis of aforementioned findings that Wireline violated the antifraud provisions of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, and the registration provisions of Sections 5(a) and 5(c) of the Securities Act.  Wireline did not admit or deny the SEC's findings.