SEC Charges ICO Issuer and CEO with Fraud and Unregistered Securities Offering
June 22, 2021, the Securities and Exchange Commission (“SEC”) charged Loci, Inc. (“Loci” or the “Firm”) and Chief Executive Officer, John Wise for making materially false and misleading statements and ultimately violating Sections 5(a) and 5(c) of the Securities act by offering and selling unregistered securities. Loci is a Delaware corporation based in Reston, Virginia providing intellectual property search services for inventors through software platform, InnVenn. Neither Loci, Mr. Wise, nor securities have been registered with the SEC.
From August 2017 to January 2018, Loci sought to raise $7.6 million dollars from investors by offering and selling digital tokens, LOCIcoin, through an unregistered and fraudulent initial coin offering (“ICO”). In promotion of the ICO, Mr. Wise made materially false and misleading statements to investors and potential investors, focusing on investor profits including:
Touting the value of LOCIcoin investors
Highlighting efforts to make LOCIcoin available for trading on digital asset trading platforms
Through social media, Loci representatives and Mr. Wise claimed they were building a “powerhouse” by highlighting plans to hire marketing and sales teams, timeline of developments, and discussions of lobbying changes for intellectual property law.
Claiming increases in LOCIcoin value as a result of their efforts
Loci representatives’ pitch decks included linear growth rate estimates and charts reporting nonexistent revenues, sales, or paid users.
As the SEC continues to protect investors and identify fraudulent behavior within the securities industry, the SEC ordered the issuer to:
Destroy all LOCIcoins in their possession or control within 10 days
Publish the Order on Loci’s social media platforms
Remove all remaining tokens from trading platforms
Abstain from participating in any digital asset securities offerings in the future
Pay a civil penalty in the amount of $7.6 million
Fair and transparent markets and investor protection will always be prioritized. Investors within the industry are entitled to truthful information and robust disclosures to be able to make informed investment decisions. In the SEC order described above, digital assets securities will be heavily scrutinized and held accountable to the highest extent when it comes to protecting investors and markets.