Crypto Investment Fund CoinAlpha Fined $50K by US SEC

[Leonardo]

The US Securities and Exchange Commission (SEC) has set a $50,000 penalty on crypto investment fund CoinAlpha for breaching federal laws by offering unregistered securities. The Delaware-based company had cooperated with the regulator during the investigation process, but neither accepted nor denied the accusations, according to an SEC order on Friday.

Along with the fine, the regulator barred CoinAlpha from violating federal securities in the future. Both penalties were imposed after SEC negotiations with the company.

CoinAlpha set up its cryptocurrency fund in October 2017 and filed an exemption of securities offering application within SEC. The company did not meet those provisions and was obliged to register for offering securities. However, CoinAlpha began its services without the required SEC permit. Moreover, the fund was not implementing proper know-your-customer (KYC) procedures to check whether its clients were accredited investors.

CoinAlpha raised $608,491 from 22 investors in October 2017-May 2018, according to SEC.

“Respondent [CoinAlpha] did not have pre-existing substantive relationships with nine of the Fund’s investors and engaged in a general solicitation of public interest in the securities offering through CoinAlpha’s website, which was generally accessible without password protection. Additionally, Respondent engaged in general solicitation through blog postings, and media interviews and digital asset and blockchain conferences, accessible both via live attendance and through the Internet,” SEC explained in the order.

“Despite collecting accredited investor questionnaires and representations from investors certifying to their accredited investor status, Respondent did not take reasonable steps to verify that investors in the Fund were accredited investors.”

SEC contacted CoinAlpha, and the firm halted cryptocurrency investment services immediately, hired a third party for KYC during the Commission’s investigation as well as undertook a review of its PR and social media accounts. In October this year, the company unwound the fund, reimbursed all fees that it had taken and made payments to guarantee that none of the investors would suffer losses.

The SEC is one of the most active regulators in the cryptocurrency space by overseeing both domestic and foreign virtual coin projects that target US investors with coins deemed to be securities.

Source: https://cryptovest.com/news/crypto-investment-fund-coinalpha-fined-50k-by-us-sec/