The SEC penalized Russia-based ICO Rating for failing to disclose it was being paid to shill cryptocurrency projects. The enforcement action comes as the Commission continues to crack down on firms that tout crypto securities without disclosures.
ICO Rating is one of several mostly Russian-run crypto rating agencies, behind ICOBench and ICOmarks. The firm advertises itself as an “independent” rating and research service on a mission to “help the market achieve the necessary standards of quality, transparency, and reliability.”
However, it seems ICO Rating failed to adhere to its own mission statement. The SEC found that the agency covertly accepted payments to shill cryptocurrency securities that were supposedly being evaluated ‘independently.’
ICO Rating violated the anti-touting provisions of the Securities Act of 1933 because it “failed to disclose that it was paid by certain issuers whose ICO offerings it rated,” said the Commission.
ICO Rating agreed to pay disgorgement and prejudgement interest of 107,000 and civil penalties of $162,000, without admitting or denying the SEC’s findings, for a total of $269,000.
“The securities laws require promoters, including both people and entities, to disclose compensation they receive for touting investments so that potential investors are aware they are viewing a paid promotional item,” said Melissa Hodgman, associate director of the Commission’s enforcement division.
This is certainly not the first (or last) time crypto-related businesses were found promoting coins without disclosure. In October 2018, BreakerMag found that half of crypto news outlets would, for a fee, publish an advertisement without disclosing they were being paid—including larger publications such as Bitcoinist and NewsBTC.
Celebrities have also been found to endorse crypto-based securities without disclosure. Floyd Mayweather and DJ Khaled were penalized by the SEC for accepting payments to shill crypto projects without informing people of receiving payment.