The Securities and Exchange Commission (SEC) has recently settled their charges against crypto startup Gladius Network LLC of running an unregistered securities offering, according to the agency on Wednesday.
Gladius Network previously conducted an initial coin offering (ICO) during the end of 2017, successfully raise over 24,000 ETH which is roughly $12.7 million. The information provided by the press release by SEC explains that this ICO wasn’t registered under federal securities laws, and the ICO itself isn’t qualified for an exemption from any registration requirements these laws impose.
With this settlement, Gladius will return funds to any investors who request for a refund and register their tokens as securities under the Securities Exchange Act of 1934. At the moment, Gladius isn’t admitting to or denying the SECs finding under the arrangement.
One thing to keep in mind, is the SEC use of the phrase “unregistered ICO” as the headline of their press release, echoing previous statements announced by the commission’s chairman, Jay Clayton, with every ICO’s he’s overseen was security.
The most important news for Gladius is that the SEC will not be imposing any sort of penalty as they’ve done so in the past, mainly due to the fact that Gladius self-reported their token sales to the regulators, according to the press release.
The SEC statment reads, in part:
“The Commission is not imposing a penalty because of the significant steps Gladius took to remediate the violation. Gladius, which was evaluating the applicability of the federal securities laws to its ICO,self-reported to staff in the Commission’s Division of Enforcement in the summer of 2018, and informed Commission staff that it wanted to do what was necessary to take prompt remedial steps. It cooperated with the staff’s investigation, providing information quickly and in a form useful to the staff.”
From the announcement, SEC cyber unit Chief Robert Cohen pointed out that, “The SEC has been clear that companies must comply with the securities laws when issuing digital tokens that are securities,”
“Today’s case shows the benefit of self-reporting and taking proactive steps to remediate unregistered offerings.”
Whether Gladius will continue its operations after this is up in the air right now, and even so their a chance that this could have lead to some serious negative impact on their rep with investors. We shall see what happens to Gladius in the coming future.