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ICO Reckoning – SEC sues ICO Promotor ICOBox and its founder Nikolay Evdokimov

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The evolving crypto scam scene

Parallel to the hype of binary options, a broker scene specialized in crypto scams developed since 2016. This development was fuelled by the Initial Coin Offerings (ICO), with which a lot of fraud was committed against retail investors. Mostly worthless projects and/or companies have received an estimated $30 billion from retail investors by issuing, selling and distributing crypto tokens between 2016 and 2018 via ICOs. Various experts estimate that more than 85% of these ICOs were scams. In many cases, the binary options scammers were also behind ICO scams.

In these ICOs more than 2,300 tokens were generated which were listed and traded on various (mostly unlicensed) crypto exchanges. These tokens, in turn, were the new “financial instrument” used by broker scams and pump-and-dump schemes (read this FinTelegram report). It is now known that most crypto exchanges have experienced massive manipulation when trading these cryptographic tokens.

The ICOBox approach

According to the U.S. Securities and Exchange Commission (SEC), one of these scams was ICOBox, a company registered in the Cayman Islands. It was founded and operated by California-based Nikolay Evdokimov. The aim of ICOBox was to act as a promoter and incubator for other ICOs. n order to finance this business model, ICOBox initially carried out an ICO itself and sold its ICOS tokens to more than 2000 investors in the USA and the rest of the world.

The SEC take

On Sept 18, 2019, the SEC sued ICOBox and its founder Nikolay Evdokimov for conducting an illegal $14 million securities offering of ICOBox’s digital tokens and for acting as unregistered brokers for other digital asset offerings (see SEC press release).

The SEC claims in its lawsuit that the ICOS token was actually security. Therefore, ICOBox would have required registration with the SEC for the proper execution of the ICO. In addition, the SEC alleges that the ICOBox acted as a promoter of ICOs as a broker of securities. This activity would also have required registration with the SEC.

Furthermore, the SEC complaint alleges that defendants claimed the tokens would increase in value upon trading and that ICOS token holders would be able to swap them at a discount for other tokens promoted on the ICOBox platform. According to the complaint, the ICOS tokens are virtually worthless.

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