Unregistered ICO Issuer Agrees to a Springing Penalty of Up to $30.9 Million
Aug. 9, 2022
File No. 3-20952
August 9, 2022 - The Securities and Exchange Commission today announced charges against Bloom Protocol, LLC, a company building an online identity attestation platform, for conducting an unregistered initial coin offering of crypto asset securities. Bloom is undertaking to register the coins and compensate harmed investors and it has agreed to pay a springing penalty of up to $30.9 million if it does not complete those undertakings.
According to the SEC's order, between November 2017 and January 2018, Bloom raised approximately $30.9 million through its offering of Bloom Tokens to fund the development of an online identity attestation platform. The order finds that a purchaser in the offering of Bloom Tokens would have had a reasonable expectation of future profit based upon Bloom's efforts in using the proceeds from the offering to create an online identity attestation system that would increase the token's value on crypto asset trading platforms. The order finds that Bloom offered and sold the tokens as investment contracts, which constituted securities, yet failed to register the offering of Bloom Tokens or qualify for an exemption.
The SEC's order finds that Bloom violated the registration provisions of Section 5 of the Securities Act of 1933. In its offer of settlement, Bloom is undertaking to register the Bloom Tokens with the Commission and conduct a claims process to compensate investors who purchased the tokens. Bloom agreed to pay a $300,000 penalty, and the order includes a provision for an additional springing penalty, up to the value of the offering proceeds, for a total possible penalty of $30.9 million, if Bloom fails to complete the claims and registration processes. According to the order, the Commission considered these undertakings, as well as remedial acts promptly undertaken by Bloom, including voluntary steps to prepare for registration, which included retaining an auditor, commencing the audit, and hiring employees to support the completion of audited financials.
The SEC's investigation was conducted by Tamar Braz and was supervised by Ansu Banerjee.