In the Matter of Wireline, Inc. Admin. Proc. File No. 3-20206
Oct. 5, 2022
On January 15, 2021, the Commission instituted and simultaneously settled cease-and-desist proceedings (the “Order”) against Wireline, Inc. In the Order, the Commission found that between January and September 2018, Wireline, an early-stage project focused on the development of a decentralized, blockchain based platform for “microservices” applications, conducted a multi-phase securities offering through which it raised over $16.3 million (the “Offering”). Wireline offered and sold securities in the form of investment contracts when it offered and sold digital assets through simple agreements for future tokens (“SAFTs”). The SAFTs provided that upon the public release of Wireline’s marketplace, Wireline would distribute those digital tokens to investors, who were counterparties to the SAFTs. Wireline represented to investors that the funds would be used to develop the Wireline microservices platform and that the tokens would be used as the means of exchange between software developers and end-users on Wireline’s marketplace. The Offering was not registered pursuant to the federal securities laws, and their offer and sale did not qualify for an exemption from the registration requirements. Wireline never distributed the digital tokens to investors.
Wireline also violated the antifraud provisions of the federal securities laws with respect to the offering by making materially false and misleading statements about the viability of its platform and the timetable for the issuance of its tokens. In connection with its securities offering, Wireline falsely asserted that more than 100 developers were publishing applications to its marketplace, that its platform had been functioning in “private beta” for more than nine months, and that the token distribution was imminent. These statements materially misrepresented Wireline’s functionality and progress, and more than two years since it made these statements, Wireline’s platform has not launched.
The Commission ordered, and Wireline has paid, a $650,000 civil penalty to the Commission. The Commission also created a Fair Fund, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty collected can be distributed to those harmed by Wireline’s conduct described in the Order (the “Fair Fund”). See the Commission’s Order: Release No. 33-10920.
Also on January 15, 2021, the Commission issued an order directing the disbursement of the Fair Fund to affected investors as detailed therein and ordering any residual funds after the payment of taxes to the U.S. Treasury. See the Commission’s Order: Release No. 34-90938.
On May 19, 2021, the Commission issued an order appointing Miller Kaplan Arase LLP, as the Tax Administrator of the Fair Fund. See the Commission’s Order: Release No. 34-91934.
For more information, please contact the Commission:
Office of Distributions