Fund managing company, CoinAlpha Advisors LLC, has recently been ordered by the U.S. Securities and Exchange Commission, the American financial guard dog, to pay a hefty of 50,000 USD, due to making an unregistered securities sale.
As per the order, published on Friday, the company had formed a fund in October 2017, aiming to invest in digital assets and subsequently reached out to potential investors. They had managed to raise more than 600,000 USD in the process. Though they had filed for “Notice of Exempt Offering of Securities,” they had neither registered with the SEC, not we’re they eligible for the exemption. The order says that the company had solicited securities investors in breach of the law,
The SEC also made it known that the company hadn’t run the adequate KYC procedures which is a measure to ensure that all the investors involved are accredited. They, however, did hire a third-party to check accreditation status after the SEC first contacted it. The order also reveals that after being approached by the SEC, the company had reimbursed all their investors. The order notes:
“A total of 22 investors invested a total of $608,491 in the Fund. In October 2018, after being contacted by the Commission staff concerning the issues herein, CoinAlpha unwound the Fund, pursuant to the authority granted in the Fund’s Limited Partnership Agreement.”
The order also says that CoinAlpha had cooperated with the SEC, who was just implementing the already negotiated sanctions. They include barring CoinAlpha from violating the Securities Act in the future and a $50,000 penalty paid to the SEC, along with the reimbursements. Though CoinAlpha was not available for a comment, the filing notes that CoinAlpha didn’t admit to or deny the allegations forwarded by the agency.
The SEC has been zeroing on many such unregistered entities, in the crypto space. For instance, EtherDelta was identified as an unregistered securities exchange.
Note: CoinAlpha Advisors LLC and CoinAlpha Inc are completely separate legal entities.This settlement will not affect the operation and product development of CoinAlpha Inc.