The US regulators fined crypto research website ICOrating.com and its founders for defrauding investors by publishing listings purportedly based on “unbiased” and “not paid for” research when in reality their ratings were impartial and seemingly influenced by the wallets of the respective ICOs.
The Russian website, which consented without admitting or denying the SEC’s allegations, is paying $268,998 to the US Securities and Exchange Commission to settle charges that it was secretly compensated for touting certain crypto projects it rated.
From December 2017 to July 2018, ICO Rating allegedly collected up to $100,572 in presentation fees. Although these ratings, in reality, were nothing more than paid advertisements, it’s not clear if the token issuers had input into the content of the site’s supposedly unbiased ratings.
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“ICO Rating charged entities a fee to rate, and produce and publish research reports regarding ICO projects on the www.icorating.com website, and to publicize the reports and ratings via social media channels,” the SEC said today.
ICO visibility might not depend on quality
The agency added that investors could be misled by biased promotions, adding that ICO promoters deemed securities must fully disclose any payments they received in order to comply with federal securities laws. Failure to do so could violate anti-touting laws which require any person who publicizes a security to fully disclose the receipt of any consideration from its issuer or dealer.
The rating sites also may be liable for potential violations of the anti-fraud laws for participating in the sale of unregistered securities, and for acting as unregistered brokers.
Melissa Hodgman, Associate Director of the SEC’s Enforcement Division, commented: “The securities laws require promoters, including both people and entities, to disclose compensation they receive for touting investments so that potential investors are aware they are viewing a paid promotional item. This requirement applies regardless of whether the securities being touted are issued using traditional certificates or on the blockchain.”