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July 21, 2023

File No. 3-21535

July 21, 2023 – The Securities and Exchange Commission today announced charges against Quantstamp, Inc., headquartered in San Francisco, California, for conducting an unregistered initial coin offering (ICO) of crypto asset securities. Quantstamp agreed to settle the charges by disgorging proceeds from the offering and paying a civil penalty.

According to the SEC’s order, in October and November 2017, Quantstamp raised over $28 million by selling “QSP” tokens to approximately 5,000 investors, including investors in the United States. The order finds that, as explained in its offering materials, Quantstamp planned to use the ICO proceeds to develop and market an automated smart contract security auditing platform. The order further finds that Quantstamp emphasized the large market potential for the smart contract security auditing product it planned to develop, led QSP purchasers to expect that the value of their tokens would increase with the success of Quantstamp’s enterprise, and took steps to make the tokens available for trading on third-party digital asset trading platforms after the ICO. The order finds that Quantstamp failed to register its offers and sales of QSP, which constituted securities, and that despite its filing of a Form D claiming that the unregistered sales of QSP were exempt under Rule 506(c) of Regulation D and pursuant to Regulation S, Quantstamp failed to qualify for any exemption to registration.    

The SEC’s order finds that Quantstamp violated the registration provisions of the federal securities laws. Without admitting or denying the SEC’s findings, Quantstamp agreed to a cease-and-desist order and to pay disgorgement of $1,979,201, prejudgment interest of $494,314, and a civil penalty of $1 million. The order establishes a Fair Fund to return monies paid by Quantstamp to injured investors. Quantstamp also agreed to transfer all remaining QSP in its control to the Fair Fund administrator to be permanently disabled or destroyed, to publish notice of the order on its website, and to convey the order to crypto trading platforms that make QSP available for trading.

According to the order, Quantstamp completed its automated smart contract security auditing platform in June 2019. It no longer operates nor lends substantial support to the platform.

The SEC’s investigation was conducted by Amanda Straub of the Enforcement Division’s Crypto Assets and Cyber Unit, with assistance from Serafima K. McTigue and from trial counsel Christopher Carney. The case was supervised by Crypto Assets and Cyber Unit Chief David Hirsch and Deputy Chief Jorge Tenreiro. 

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