Esports betting operator Unikrn has agreed a settlement worth $6.1m with the US Securities and Exchange Commission (SEC) after it was found to have carried out an unregistered initial coin offering (ICO) of digital asset securities.
According to the SEC, Unikrn raised approximately $31m through its offering of the UnikoinGold (UKG) token between June and October 2017.
The SEC said Unikrn had planned to use proceeds from the offering to increase the amount of features available on its gaming platform, as well as to develop additional applications for the UKG tokens.
However, the SEC also found Unikrn had promised investors it would facilitate a secondary trading market for UKG tokens, while its efforts to increase the use of UKG tokens would boost demand and, in turn, the value of the tokens.
As such, the SEC ruled that Unikrn offered and sold UKG as investment contracts, which constituted securities, but did not register the token offering or qualify for an exemption.
Unikrn did not admit or deny the charges, but did agree to pay the settlement in full. The agreement will see Unikrn establish a ‘Fair Fund’, which will return this money to investors impacted by the offering.
Unikrn also agreed to disable the UKG, publish notice of the SEC’s order and to request removal of UKG from all digital asset trading platforms.
The SEC said it took all of these undertakings, as well as the fact that the agreed sum represents substantially all of Unikrn’s assets, into account when it accepted the settlement arrangement.
“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,” Kristina Littman, chief of the SEC’s enforcement division, cyber unit, said.
“This resolution allows us to return substantially all Unikrn assets to already-harmed investors and includes measures to prevent future sales to retail investors, including the disabling of the tokens.”
In a relation to the SEC’s ruling, the Washington State Department of Financial Institution also announced it had reached a settlement with Unikrn for violations of state registration provisions connected to the token offering.