On September 15, the U.S. Securities and Exchange Commission (SEC) announced settled charges against Unikrn Inc., an operator of an online eSports gaming and gambling platform. The SEC charged Unikrn for conducting an unregistered initial coin offering (ICO) of digital asset securities. Unikrn agreed to pay a $6.1 million penalty as part of the settlement. Qualified SEC whistleblowers should now submit award claims for the case.
According to the SEC, Unikrn raised approximately $31 million through its offering of the UnikoinGold (UKG) token between June and October 2017. Unikrn allegedly told investors it would facilitate a secondary trading market for UKG tokens and that the demand for and value of the tokens would rise over time. The SEC therefore alleges that Unikrn sold the tokens as investment contracts, which constitute securities, but failed to register the tokens as securities. The SEC charged Unikrn with violating the registration provisions of the federal securities laws.
“The securities registration and exemption framework is designed to ensure investor protection and access to material information, while also facilitating capital formation. Failure to follow this framework harms investors and our markets,” said Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit. “This resolution allows us to return substantially all of Unikrn’s assets to already-harmed investors and includes measures to prevent future sales to retail investors, including the disabling of the tokens.”
Without either confirming or denying the SEC’s allegations, Unikrn agreed to settle the charges. As part of the settlement, Unikrn is to pay a $6.1 million civil penalty which will be distributed to investors through a Fair Fund.
On October 30, the SEC posted a Notice of Covered Action in reference to the case. The Notice serves as an announcement to individuals who may have alerted the government to the violations in this case to file a whistleblower award claim. Through the SEC Whistleblower Program, qualified whistleblowers who willingly provided original information that led to this enforcement action are entitled to an award ranging from 10-30% of the collected $6.1 million.
Since the 2021 fiscal year began on October 1, the SEC has issued approximately $154 million to six whistleblowers. In the 2020 fiscal year, the SEC issued whistleblower awards totaling approximately $175 million, the most in program history. The SEC is currently on pace to break that record within the first two months of this fiscal year.
Unregistered ICO Issuer Agrees to Disable Tokens and Pay Penalty for Distribution to Harmed Investors