SEC settles charges against cryptocurrency issuer Wireline
The United States Securities and Exchange Commission (SEC) announced on Friday settled charges against financial technology company Wireline, Inc. The company allegedly made materially false and misleading statements in connection with an unregistered offer and sale of digital asset securities.
According to the SEC’s order, beginning in 2017, Wireline raised more than $16 million from investors in order to develop a platform or “marketplace” for the development and sale of microservices, which are individual components of a larger software architecture. Wireline represented to investors that it planned to create a digital token that would be used as the means of exchange between software developers and end-users in Wireline’s proposed marketplace.
The order finds that, in its efforts to raise funds from investors, Wireline distributed marketing materials that materially misrepresented the functionality of Wireline’s platform and the timing of the token distribution. For example, the order finds that Wireline falsely asserted that more than 100 developers were publishing applications to Wireline’s marketplace, the Wireline platform had been functioning in “private beta” for more than nine months, and that the token distribution was imminent.
The order further finds that Wireline offered and sold digital assets through simple agreements for future tokens, or SAFTs, but the offering was not registered pursuant to the federal securities laws and did not qualify for an exemption. In fact, no tokens were ever distributed pursuant to the SAFTs.
The SEC’s order finds that Wireline violated the antifraud provisions of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, and the registration provisions of Sections 5(a) and 5(c) of the Securities Act.
Without admitting or denying the SEC’s findings, Wireline agreed to a cease and desist order and to pay a penalty of $650,000 that will be distributed to investors. The company will also perform undertakings that include a notification to investors that tokens will not be distributed pursuant to the SAFTs.