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 offeringORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS
pursuant to the federal securities laws, nor did it qualify for an exemption to the registration requirements.
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.