SEC takes action against unregistered ICO promoter, Gladius Networks, LLC

On February 20, 2019, the Securities and Exchange Commission (SEC) filed a settled cease and desist proceeding against an initial coin offering (“ICO”) promoter, Gladius Network LLC (“Gladius”), a company organized under Nevada state law with headquarters in Washington, D.C. 

In the complaint initiating the case (see also primary source materials below), the SEC alleged that Gladius raised $12.7 million in an unregistered, non-exempt initial coin offering (ICO) before it self-reported to the Commission. 

Allegations against Gladius

In initiating the case (see primary source materials below), the SEC alleged that Gladius raised $12.7 million in an unregistered, non-exempt initial coin offering (ICO) before it self-reported to the Commission. 

Gladius raised approximately $12.7 million worth of Ether during its ICO, based on the exchange rate to USD of Ether at the time of the offering. Gladius did not register the offering
pursuant to the federal securities laws, nor did it qualify for an exemption to the registration requirements.

ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS

As part of its settlement with the Government, Gladius agreed to offer token purchasers the option to request that their investment funds be returned, meaning Gladius would be obligated to return funds to any investor who made such a request.

The wisdom of self-reporting

The Gladius matter is somewhat unique in the cryptocurrency space because until recently, few (if any) companies have self-reported, as opposed to being found out by the watchdog agencies with jurisdiction over their activities. Companies that self-report and cooperate in implementing remediation steps can often benefit from reduced penalties from regulators.

Primary Source Documents

The foregoing article is provided for informational purposes only and is not legal advice or a legal opinion, and does not create an attorney-client relationship. It may not apply to your specific facts or circumstances, and you should not act or rely on any information contained in this article without first seeking the advice of an attorney licensed to practice in your state.

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