Quantstamp Settles SEC Close Look at $28.35M Crypto Offering

The U.S. Securities and Exchange Commission (SEC) has made a move against Quantstamp, Inc. (QSP), a San Francisco-based firm, for conducting an unregistered initial coin offering (ICO) involving crypto asset securities. As part of Quantstamp Settles SEC, Quantstamp has agreed to forfeit the profits from the ICO and pay a civil fine.

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Quantstamp Settles SEC

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The Controversial Quantstamp Settles SEC

  • Quantstamp Settles SEC carried out its ICO between October and November 2017, raising over $28 million.
  • The firm sold “QSP” tokens to approximately 5,000 investors globally, including those residing in the United States.
  • Investors were led to believe that the funds raised would be used to develop and market an automated smart contract security auditing platform, subsequently increasing their tokens’ value.
TitleQuantstamp Settles SEC for Unregistered ICO of Crypto Asset Securities
IntroductionSEC penalizes Quantstamp, a San Francisco firm, for conducting an unregistered ICO
The Controversial ICOQuantstamp to forfeit profits, pay fines totaling $3.5 million and compensate affected investors
Potential MarketQuantstamp promised a smart contract security platform; aimed to list tokens on trading platforms
Violation of LawsFailed to qualify for exemption; SEC deemed the offering as unregistered securities
Terms of SettlementQuantstamp to forfeit profits, pay fines totaling $3.5 million, and compensate affected investors
Post-SettlementQuantstamp ceased major operations after completing its smart contract security platform
SEC’s InvestigationAmanda Straub led the investigation; David Hirsch and Jorge Tenreiro supervised the case
Quantstamp Settles SEC
Quantstamp Settles SEC

Potential Market and Violation of Laws

  • Quantstamp capitalized on the potential market for its proposed product and took steps to list the tokens on third-party digital asset trading platforms.
  • However, the SEC discovered that Quantstamp did not qualify for any exemption, despite filing a Form D claiming that the sales of QSP were exempt under Rule 506(c) of Regulation D and Regulation S.
  • Consequently, this violation resulted in the offering being deemed securities, in breach of federal securities laws requiring proper registration.

Terms of Settlement

  • Quantstamp, without admitting or denying the SEC’s findings, agreed to a cease-and-desist order and agreed to pay a disgorgement amounting to $1,979,201, along with prejudgment interest of $494,314 and a civil penalty of $1 million.
  • A Fair Fund was established to compensate the affected investors.
  • Furthermore, Quantstamp Settles SEC to transfer all remaining QSP under its control to the Fair Fund administrator for permanent disposal or destruction.

Post-Settlement Actions

Following the settlement, Quantstamp, which completed its automated smart contract security auditing platform in June 2019, ceased active operations and considerably reduced its support for the platform.

SEC’s Investigation and Supervision

  • The SEC’s investigation was spearheaded by Amanda Straub of the Enforcement Division’s Crypto Assets and Cyber Unit.
  • The case was supervised by Crypto Assets and Cyber Unit Chief David Hirsch and Deputy Chief Jorge Tenreiro.

Frequently Asked Questions(FAQ)

Q1. What is the reason for the SEC’s action against Quantstamp?

As part of Quantstamp Settles SEC, Quantstamp has agreed to forfeit the profits from the ICO and pay a civil fine. for conducting an unregistered initial coin offering (ICO) involving crypto asset securities.

Q2. How much money did Quantstamp raise through its ICO?

Quantstamp raised over $28 million through its ICO held in October and November 2017.

Q3. How many investors participated in Quantstamp’s ICO?

Approximately 5,000 investors worldwide, including those from the United States, participated in Quantstamp’s ICO.

Q4. What did Quantstamp promise to do with the funds raised from the ICO?

Quantstamp promised to use the raised funds to develop and market an automated smart contract security auditing platform.

Q5. What penalties did Quantstamp agree to pay as part of the settlement?

Quantstamp agreed to pay a disgorgement of $1,979,201, prejudgment interest of $494,314, and a civil penalty of $1 million as part of the settlement with the SEC.

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