The SEC has settled with CoinAlpha Advisors LLC, a Delaware-registered, California-based company the Commission says sold a cryptocurrency investment fund product without registering with the SEC or qualifying for a securities exemption.
According to the cease-and-desist order issued Friday, December 7th, CoinAlpha Advisors formed in July 2017 and, “…never…registered with the Commission in any capacity.”
The company formed its fund in October 2017, “…for the purpose of investing in digital assets,” and for the next eight months, until May 2018, “…raised approximately $600,000 from 22 investors, residing in at least five U.S. states.”
Though the company filed for a Form D Notice of Exempt Offering of Securities on November 3, 2017, the SEC says the application was affected by the fact that the company had never registered, and the fact that, “…no exemption from registration was available…during the Relevant Period.”
The company allegedly proceeded to raise funds from investors despite having no, “pre-existing substantive relationships with nine of (them)…(and failed to take) reasonable steps to verify that investors in the Fund were accredited…”
CoinAlpha partners also allegedly, “…engaged in a general solicitation of public interest in the securities offering through… blog postings…media interviews and digital asset and blockchain conferences…”
The SEC says CoinAlpha was completely cooperative and, “…immediately halted the offering when contacted by the Commission staff and undertook a review of its website, social media postings, digital asset and blockchain conference marketing materials, and offering procedures.”
CoinAlpha partners also, “…voluntarily reimbursed all fees it had already collected, surrendered all rights to future management and incentive fees, unwound the Fund, and made payments to ensure that no Fund investor suffered a loss.”
The company has also agreed to pay a $50 000 civil fine to the SEC plus any applicable interest.
All told, the SEC found that CoinAlpha:
“…violated Section 5(a) of the Securities Act, which prohibits the sale of securities through interstate commerce or the mails unless a registration statement is in effect, and Section 5(c) of the Securities Act, which prohibits the (unregistered) offer to sell any security through interstate commerce or the mails…”