April 29 (Cointime) - Seattle-based cryptocurrency company Coinme and its CEO, Neil Bergquist, have been fined nearly $4 million by the US Securities and Exchange Commission (SEC) for conducting an unregistered and deceptive sale of UpToken, an Ethereum-based cryptocurrency asset.

According to an SEC filing, Coinme and its associated defendants conducted an initial coin offering (ICO) for UpToken from October to December 2017, raising approximately $3.65 million in exchange for the asset. The SEC found that UpToken was offered and sold as investment contracts and, therefore, securities. Coinme and Bergquist were found to have violated securities laws for making misleading claims about UpToken, which misled investors. The purpose of the ICO was to raise funds to expand Coinme's bitcoin ATM network globally. After the ICO, Coinme used the proceeds for various corporate purposes, including deploying an additional 30 ATMs. UpToken holders received benefits such as discounted transaction fees and rewards in the form of UpToken when they used Coinme's ATMs. 

Coinme and Up Global have been ordered to pay a total of $3.77 million, while Bergquist has been instructed to pay $150,000. Nonetheless, neither party has confessed nor refuted any wrongdoing in relation to this issue. Additionally, Bergquist has been barred from serving as an officer or director of public enterprises for three years.

While speaking about the new development, the SEC was quoted as saying:

"Based on the facts and circumstances set forth below, UpToken were offered and sold as investment contracts and therefore securities under SEC [guidelines]. An UpToken investor would have had a reasonable expectation of obtaining a future profit from the rise in value of UpToken based upon Respondents’ efforts.

The incident comes on the heels of rampant crypto crackdowns which many businesses operating in the country have witnessed in recent times. As of late, the financial regulator has been making a concentrated effort to address what it sees as a lack of compliance on the side of cryptocurrency platforms and the intermediaries that work with them."