On March 5, 2020, the Honorable Dale S. Fischer of the United States District Court for the Central District of California entered default judgment against ICOBox and its founder Nikolay Evdokimov for conducting an illegal $14.6 million securities offering of ICOBox's digital tokens and for acting as unregistered brokers for other digital asset offerings.
The SEC's complaint, filed on September 18, 2019, alleged that ICOBox raised funds in 2017 to develop a platform for initial coin offerings by selling, in an unregistered offering, roughly $14.6 million of "ICOS" tokens to over 2,000 investors. The complaint further alleged that ICOBox failed to register as a broker but acted as one by facilitating initial coin offerings that raised more than $650 million for dozens of clients.
The court granted default judgment for the SEC on all charges. The court found that the defendants illegally offered and sold ICOS tokens, which the court concluded were securities subject to the registration requirements of the federal securities laws. The court also found that the defendants acted as unregistered brokers. The court permanently enjoined ICOBox and Evdokimov from violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 and the broker registration provisions of Section 15(a) of the Securities Exchange Act of 1934, and ordered them to pay disgorgement and prejudgment interest totaling $16,059,428.99. The court also ordered Evdokimov to pay a civil penalty of $192,768.
The SEC's investigation was conducted by Brent W. Wilner and was supervised by Victoria A. Levin, Alka N. Patel, and Michele Wein Layne of the Los Angeles Regional Office. The litigation was conducted by Amy J. Longo of the Los Angeles Regional Office.
Ans : The parties are ICOBox and its founder Nikolay Evdokimov as the defendants and SEC (Securities and Exchange Commission) as the Plaintiff.
Ans : As per the plaintiff’s complaint, the defendants illegally offered and sold ICOS tokens in an unregistered offering to over 2000 investors. ICOBox raised funds in 2017 to develop a platform for initial coin offerings by selling, in an unregistered offering, roughly $14.6 million of "ICOS" tokens to over 2,000 investors. It is also alleged that ICOBox failed to register as a broker but acted as one by facilitating initial coin offerings that raised more than $650 million for dozens of clients.
The 2000 investors and the clients who have invested $14.6 million in the unregistered offering of initial coin offerings have been harmed since the investment is now considered worthless.
Ans : By ignoring the registration requirements of the federal securities laws, ICOBox and Evdokimov exposed investors to investments, which are now virtually worthless, without providing information that is critical to making informed investment decisions.
Ans: The court granted default judgment for the SEC on all charges. The court found that the defendants illegally offered and sold ICOS tokens, which the court concluded were securities subject to the registration requirements of the federal securities laws. The court also found that the defendants guilty of acting as unregistered brokers. The court permanently enjoined ICOBox and Evdokimov from violating the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 and the broker registration provisions of Section 15(a) of the Securities Exchange Act of 1934, and ordered them to pay disgorgement and prejudgment interest totaling $16,059,428.99. The court also ordered Evdokimov to pay a civil penalty of $192,768.
In the case of ICOBox the allegations are that the platform was actively involved in marketing of the offerings that they listed. ICOBox promised to pitch the offerings to their media contacts, develop content for promotional materials and promote the listed companies at conferences. The SEC included this in the complaint because the SEC thinks these acts constitute “facilitation”. ICOBox is not the only crowdfunding platform that has helped to promote the offerings it lists. We get e-mails all the time from platforms inviting a lot of the offerings they promote make outrageous claims and promises. ICOBox case as a clear warning from the SEC to the crowdfunding platforms to get their act together. If the platform stays within the regulatory white lines, then regulators should leave it alone. Unfortunately, it is apparent that many crowdfunding platforms have no idea what the rules require. They are setting themselves up to be defendants in enforcement actions by regulators or civil actions by disgruntled investors.
Describe the violation illustrated by the case, e.g. Who are the parties? What did the violator(s)...