Unikrn stung by $6.1m SEC fine over ICO failings
Crypto-first esports operator raised $31m in 2017 offering that was never properly disclosed
Esports betting operator Unikrn has been fined $6.1m by the Securities and Exchange Commission (SEC) for conducting an unregistered initial coin offering (ICO) in 2017.
Between June and October 2017, the firm raised around $31m through the offering of its own cryptocurrency, the UnikoinGold (UKG) token, but did so under the guise of investment contracts.
Under SEC regulation, investment contracts, which constitute securities, must be declared and registered, which Unikrn failed to do, and therefore violated registration provisions of the federal securities law.
The $6.1m penalty, which accounts for substantially all of the company’s assets, will be distributed to original investors in UKG through a Fair Fund.
As well as being handed the fine, Unikrn must also disable UKG and remove the token from all digital trading platforms.
Unikrn pleaded neither innocent nor guilty, instead reaching a “mutually agreed upon settlement” after months of discussions with the SEC.
Kristina Littman, chief of the SEC enforcement division’s cyber unit, said actions such as Unikrn’s harmed investors and markets.
Littman said: “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.
“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,” she added.
Writing on LinkedIn, Unikrn CEO Rahul Sood said: “Ultimately we’re happy to put this chapter behind us, customers of UKG can be made whole, and we can focus on our future.”
Sood also went on to cite SEC commissioner Hester Peirce, who appeared to disagree with the SEC’s punishment.
Pierce said: “[Unikrn] is not alleged to have engaged in any fraud. The commission is effectively forcing the company to cease operations because of an allegedly improper offering of supposed securities.
“While I do not concur in my colleagues’ opinion that Unikrn’s token offering constituted a securities offering, I recognise that whether an instrument is offered and sold as a security in the form of an investment contract requires a subjective weighing of the facts and circumstances.
“Such analysis, idiosyncratic by its very nature, does not produce clear guideposts for entrepreneurs and others to follow,” she added.
Unikrn confirmed it would continue to trade, allowing customers to play with both crypto and FIAT currencies.