ICO Issuers CarrierEQ (Airfox) and Paragon Coin Inc. reportedly agree to Register Tokens as Securities

 According to a press announcement on November 16, 2018, the Securities and Exchange Commission announced that it has reportedly settled charges against two companies, CarrierEQ Inc. (Airfox) and Paragon Coin Inc., that allegedly sold digital tokens in initial coin offerings (ICOs).

These are reportedly the SEC’s first cases imposing civil penalties solely for ICO securities offering registration violations.  Both companies have purportedly agreed to return funds to harmed investors, register the tokens as securities, file periodic reports with the Commission, and pay penalties.

Both CarrierEQ Inc. (Airfox) and Paragon Coin Inc. allegedly conducted ICOs in 2017 after the SEC warned that ICOs can be securities offerings in its DAO Report of Investigation, according to the regulator’s orders.

According to the complaint, Airfox, based in Boston, allegedly raised approximately $15 million worth of digital assets to finance its development of a token-denominated “ecosystem” starting with a mobile application that would allow users in emerging markets to earn tokens and exchange them for data by interacting with advertisements.

Paragon allegedly raised approximately $12 million worth of digital assets to develop and implement its business plan to add blockchain technology to the cannabis industry and work toward legalization of cannabis as an online entity.

Neither Airfox nor Paragon purportedly qualified for an exemption to the registration requirements, nor did they register their ICOs pursuant to the federal securities laws.

The SEC orders reportedly impose $250,000 penalties against each company and include undertakings to compensate harmed investors who purchased tokens in the offerings.  The companies will also reportedly be required to register their tokens as securities and file periodic reports with the Commission for at least one year. Airfox and Paragon consented to the orders without admitting or denying the findings.

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