The US Securities and Exchange Commission (SEC) has halted a fast-moving initial coin offering (ICO) that was seeking to raise up to $15 million from thousands of investors to develop an iPhone app for restaurant meal reviews.
California-based company Munchee Inc agreed to stop its ICO and refund investor proceeds after the SEC released a report stating that its ‘MUN tokens’ fit the hallmarks of a security, the agency said on Monday.
The US top regulator warned investors against throwing money into the crowdsale because the company intended to launch a cryptocurrency-based investment scheme without even attempting to follow US securities laws.
Specifically, the company’s marketing activities unlawfully and publicly touted several claims to lure investors to their tokens, which gave the SEC “a reasonable belief that their investment in tokens could generate a return on their investment.” This included Munchee saying that it will promote the tokens to be exchanged for meals at many restaurants, and to take steps to create a secondary market, which may help the tokens increase in value.
Ready to kick-off your Trading Game with Manchester United?Go to article >>
“In deciding not to impose a penalty, the Commission recognized that the company stopped the ICO quickly, immediately returned the proceeds before issuing tokens, and cooperated with the investigation,” said Stephanie Avakian, co-director of the SEC’s enforcement division.
The developer of the restaurant review app consented to the SEC’s cease-and-desist order without admitting or denying the findings.
Munchee’s case is the second to be brought by the SEC’s new cyber unit, which was created in September to target violations involving distributed ledger technology and initial coin offerings as part of a new effort to fight cyber-crime.
Earlier last week, the SEC charged PlexCoin ICO organizer Dominic Lacroix, who raised $15 million by soliciting investors from the US and Canada, with illegally profiting from defrauding customers through off-market investment pools.