According to Reuters, the U.S. Securities and Exchange Commission halted an initial coin offering from a restaurant review app after the company did not register it as a security. Munchee Inc. had complied with halting its offering and investor proceeds after the SEC had notified the company on the first of November.
ICOs rely on cryptocurrencies and technology such as blockchain to raise money has been under close inspection by regulators. The SEC disapproved of the company’s plan to raise $15 million by selling “MUN tokens,” which may be purchased or earned by users for writing restaurant meal reviews on the app. Munchee Inc. claimed that it was negotiating with restaurants to accept those tokens for meal and to sell advertising for tokens so that the tokens may appreciate in value.
Although the SEC reported that investors could get a ROI in MUN tokens, this would make it a security that requires SEC registration. Upon contacting Munchee on the second day it sold tokens, the SEC forced Munchee to shut down the offering within hours of notice. Munchee Inc. returned proceeds to investors and halted the delivery of tokens.
“In deciding not to impose a penalty, the Commission recognized that the company stopped the ICO quickly,” co-director of the SEC’s enforcement division, Stephanie Avakian said.
This indicates that the SEC plans to enforce action to address ICOs for registration violation even if there are no inquiries with the said ICO. The Cryptocurrency market will track how regulators respond to ICO’s, SEC Chairman Jay Clayton said that resemble new company initial public offerings that should have all details transparent.