SEC Charges Cryptocurrency Issuer with False and Misleading Statements in Connection with Unregistered Offering
Jan. 15, 2021
File No. 3-20206
The Securities and Exchange Commission today announced settled charges against financial technology company Wireline, Inc. for making materially false and misleading statements in connection with an unregistered offer and sale of digital asset securities.
According to the SEC's order, beginning in 2017, Wireline raised more than $16 million from investors in order to develop a platform or "marketplace" for the development and sale of microservices, which are individual components of a larger software architecture. As described in the order, Wireline represented to investors that it planned to create a digital token that would be used as the means of exchange between software developers and end-users in Wireline's proposed marketplace. The order finds that, in its efforts to raise funds from investors, Wireline distributed marketing materials that materially misrepresented the functionality of Wireline's platform and the timing of the token distribution. For example, the order finds that Wireline falsely asserted that more than 100 developers were publishing applications to Wireline's marketplace, the Wireline platform had been functioning in "private beta" for more than nine months, and that the token distribution was imminent. The order further finds that Wireline offered and sold digital assets through simple agreements for future tokens, or SAFTs, but the offering was not registered pursuant to the federal securities laws and did not qualify for an exemption. According to the order, no tokens were ever distributed pursuant to the SAFTs.
The SEC's order finds that Wireline violated the antifraud provisions of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, and the registration provisions of Sections 5(a) and 5(c) of the Securities Act. Without admitting or denying the SEC's findings, Wireline agreed to a cease and desist order, to pay a penalty of $650,000 that will be distributed to investors, and to perform undertakings that include a notification to investors that tokens will not be distributed pursuant to the SAFTs.
The SEC's investigation was conducted by H. Norman Knickle and supervised by Mark Cave and Anita B. Bandy.