On Tuesday, the Securities and Exchange Commission (SEC) announced that it settled fraud charges against Loci Inc. and its CEO John Wise. The accompanying order accused the respondents of making materially false and misleading statements in connection with an unregistered offer and sale of digital asset securities called “LOCIcoin.”
The order stated that Loci, founded in 2016, developed a software platform called InnVenn, which provides an intellectual property search service for inventors and other users through its software platform. Purportedly, Wise and his company planned to earn revenue from fee-based subscriptions, which users could pay by credit card.
The respondents raised $7.6 million by offering and selling LOCIcoins through an initial coin offering (ICO). This occurred from August 2017 to January 2018 through efforts made by Wise and others that reportedly “touted the value of LOCIcoin to investors, highlighted their efforts to make LOCIcoin available for trading on digital asset trading platforms, and claimed that LOCIcoin would increase in price as a result of their efforts.”
Wise’s public statements about the companies’ investors, potential investors, user base, revenues, and number of employees were reportedly false. In addition, investor funds were reportedly used for purposes other than those promised, development, operations, and marketing. Instead, the SEC alleged that Wise improperly used $38,163 of investor funds to pay for personal expenses.
The SEC’s order concluded that Wise and Loci violated the antifraud and registration provisions of the Securities Act. The respondents have agreed to a cease and desist order that requires them to “destroy their remaining tokens, request the removal of the tokens from trading platforms, publish the SEC’s order on Loci’s social media channels, and refrain from participating in future digital asset securities offerings,” without admitting or denying fault. The SEC’s order also imposes a civil penalty against Loci, and an officer and director bar against Wise.
The complaint is one of many filed against companies and their executives for ICO registration issues and fraud. SEC cryptocurrency targets include Start Options and Bitcoiin2Gen, Coinseed, Ripple Labs, and the NAC Foundation, among others.