SEC returns $4,6 million to participants in BitClave’s CAT token ICO

What’s new? The US Securities and Exchange Commission (SEC) has distributed $4,6 million to investors of California-based crypto startup BitClave. BitClave folded in 2020 after the SEC sued it for unregistered offering of securities in an initial token offering (ICO) format.

Source: X.com

What else is known? BitClave held an ICO of native Consumer Activity Tokens (CAT) in late November 2017 and raised the maximum possible amount (hardcap) of $25,5 million in just 32 seconds. Around 9500 investors, including those from the United States, participated in the offering.

BitClave was developing a decentralized search platform based on the Ethereum blockchain for advertisers to interact with users through smart contracts. The platform would allow users to get paid for providing data for ad targeting and reduce the cost of advertising by eliminating middlemen.

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In May 2020, the SEC ordered BitClave to return all funds raised from the ICO to investors, as well as pay $3,8 million in fines for violating securities laws.

The SEC, then headed by Jay Clayton, relied on the Howey Test in its conclusions. According to officials, BitClave’s statements allowed investors to think that the CAT rate would rise due to the company’s activities.

The Howey test, which has been used in the US since 1946, determines whether an asset is an investment contract. It contains four criteria: investment, common enterprise, reasonable expectation of profit, and the efforts of others. In other words, the SEC recognizes an asset as a security if investors expect to receive a return on an investment in a company or token managed by third parties.

The company agreed to comply with the requirements to settle the claims without admitting or denying them. It also agreed to request exchanges to delist CAT and destroy all unallocated tokens.

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Under the parties’ agreement, the distribution of funds to investors is done through a specially established BitClave Fair Fund. Although the company was supposed to allocate a total of $29,3 million to the fund, as of February 2023, only $12 million was in the fund. Investors themselves had to apply for refunds by August 2023.