The Securities and Exchange Commission has started a new lawsuit against Quantstamp for illegally raising $28 million in 2017 via ICO. It is worth noting that Quantstamp is a cryptocurrency security enterprise that performs smart contracts, networking, Web3, front-end, and off-chain audits for decentralized applications.
The firm is based out of California and it has responded by agreeing to settle with the federal agency.
To this end, the firm is determined to repay the $28 million that it raised during its ICO event. SEC officials publicized the case proceedings on 21st July. The charges against the firm hold it accountable for dealing in unregistered securities in the form of cryptocurrencies during its 2017 ICO.
SEC has also acknowledged that the firm has decided to settle the charges. The ICO in question took place between November and October 2017 where the company offered QSP tokens to 5000 participants.
Quantstamp Introduces Automated Auditing Capabilities Using ICO Funding
The firm has revealed that it sponsored the smart contract security audit feature for its enterprise using the funds raised by the ICO. On the other hand, SEC prosecutors have touted its massive growth potential that led to a significant increase in the price of QSP tokens.
SEC has also maintained that Quantstamp has failed to register with any financial regulators before organizing the ICO.
SEC officials have iterated that the federal agency has classified the QSP token distribution during the ICO to be unregistered securities. SEC has charged the firm with violating the federal securities laws. However, Quantstamp lawyers have refrained from either admitting or denying the charges brought by SEC.
The crypto enterprise has decided to agree to a cease-and-desist order and pay $1.9 million as disgorgement, $494K as prejudgement interest, and $1 million in civil penalties.
In addition to the penalty charges paid to the Securities and Exchange Commission, the firm is also ordained to reimburse the affected investors.
To this end, Quantumstamp has agreed to pay the administrator of the Fair fund in the form of QSP tokens from its native reserves. The fund admin intends to destroy the tokens to ensure positive price movement.
On the other hand, Quantumstamp has declared that its automated smart contract audit feature is not active since 2019. Meanwhile, the federal agency has shown no signs of slowing down in terms of its crypto market crackdown.
This week, Gary Gensler head of the SEC, has called for $72 million in additional funding from the Senate Committee of USA. The Senate Committee has approved $2.364 billion for the 2024 session and still reviewing the additional budget request.
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