SEC Orders Crypto Startups to Register ICO Tokens or Face $31M Fine

Crypto startup Bloom Protocol has been ordered by the US Securities and Exchange Commission (SEC) to register its tokens or face a $31 million fine.

The SEC issued a cease-and-desist order to the company on Tuesday, accusing it of offering unregistered securities.

Bloom violated securities laws by offering and selling Bloom Tokens (BLT) in an unregistered ICO between November 2017 and January 2018, the order states.

The Gibraltar-registered firm managed to raise $30.9 million from nearly 7,400 investors around the world, including in the US, which means the SEC plans to fine Bloom for the amount of crypto raised in its ICO.

Founded in 2017, Bloom describes itself as a blockchain-powered credit scoring solution that aims to reduce the risk of identity theft. It claims their system minimizes fraud prevention and customer onboarding costs.

Bloom promoted BLTs as investment contracts that inherently mark them as securities, in line with the Howey test, according to the SEC.

“A buyer in the offering of BLT would have had a reasonable expectation of obtaining a future profit based on Bloom’s efforts … to create an online identity certification system that would increase the token’s value on crypto-asset trading platforms,” ​​the regulator said.

Bloom’s crypto tanks even more after SEC order

BLT opened trading in late January 2018 at around $1.38, still an all-time high, at the height of the previous bull market, per CoinGecko. BLT continued to collapse by up to 80% over the next few months – an incredibly volatile time for cryptocurrencies, especially small and illiquid ones like BLT.

After briefly rising above $1 in May 2018, BLT’s price has been under severe pressure ever since. Bloom’s token is now trading for a fraction of a cent, after dumping 70% on news of the SEC’s action.

At its peak, BLT’s market cap reached nearly $60 million, but that figure is now less than $500,000.

Bloom allegedly told potential investors that the limited pre-sale was “oversubscribed” and that it raised a “hard cap of a total of $50 million.” The average investment during the presale was $340,000 and the average during the public sale was $2,000, regulators found, which when calculated do not match the advertised limit.

Bloom is expected to register BLT as a security class within 270 days and inform investors of potential demands to get their money back within 60 days. It has been required to fulfill all payments to investors within three months of the submission deadline for the claim form.

Bloom did not return Blockworks’ request for comment by press time.

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