Coinme Settles SEC Charges Over Unregistered Crypto Asset Offerings and Misleadi...

The Securities and Exchange Commission (SEC) recently announced settled charges against Seattle-based company Coinme Inc., its subsidiary Up Global SEZC, and Neil Bergquist, the Chief Executive Officer of both entities. The charges relate to conducting unregistered offers and sales of a crypto asset called “UpToken” and making false and misleading statements about the demand for UpToken and the amount raised in the offering.

Unregistered Offers and Sales of Crypto Asset Securities

According to the SEC order, between October 16, 2017, and December 15, 2017, Coinme, Up Global, and Bergquist engaged in unregistered offers and sales of crypto asset securities. They marketed the financial benefits that UpToken investors would gain from Coinme purchasing UpToken in the secondary market after the Initial Coin Offering (ICO).

The order also reveals that Bergquist and Up Global, unbeknownst to UpToken investors, took steps before and throughout the ICO to secure an UpToken supply that would significantly reduce Coinme’s need to purchase UpToken after the ICO. Moreover, they knowingly or recklessly inflated amounts raised during the ICO in public statements.

The SEC’s order determines that Coinme, Up Global, and Bergquist violated Sections 5(a) and 5(c) of the Securities Act of 1933. Additionally, Bergquist and Up Global were found to have violated Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934, along with Rule 10b-5 thereunder.

Settlement Terms and Penalties

Coinme, Up Global, and Bergquist agreed to settle the charges without admitting or denying the SEC’s findings. They committed to cease and desist from future violations of the cited provisions and comply with specific undertakings. 

Up Global will pay a $3,520,000 penalty as part of the settlement, for which Coinme is jointly and severally liable. Coinme will pay an additional penalty of $250,000, while Bergquist will pay a penalty of $150,000. 

Furthermore, the SEC order bars Bergquist from acting as an officer or director of a public company for three years.

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