SEC Orders Bloom Protocol To Register BLT As Security Or Face $31M Fine

August 12, 2022 3:49 pm

It seems that the SEC is once again regulating the crypto industry through litigation and lawsuits instead of establishing fair guidelines.

Recently, the SEC just sent a letter to Bloom Protocol requesting it to register its BLT token as a security or risk getting fined up to $31 million.

The letter shows that the SEC is claiming that Bloom had violated the Securities Act by offering the BLT tokens as part of an ICO that was done all the way back in 2017.

The fact that it took the SEC nearly 5 years after the ICO to take action on this makes the SEC’s intentions questionable for many crypto investors.

CryptoSlate reports:

In the 18-page letter sent on Aug. 9, the SEC accused Bloom of violating the Securities Act by offering its BLT tokens through an initial coin offering (ICO) between Nov. 14, 2017, to Jan. 2, 2018.

The SEC said the crypto startup raised $30.9 million from 7,358 investors worldwide. It continued that the firm had to refund those who bought its BLT token before January 2, 2018 –a failure to do this meant the firm would have to pay all the fines to the SEC.

The SEC noted that Bloom was quick to take remedial actions like agreeing to register BLT as securities, retaining an auditor to start the audit of its entities, and hiring full-time employees to fast-track the auditing and compliance necessary before registration.

Bloom Protocol started in 2017, intending to revolutionize the credit scoring industry using blockchain technology.

The agency is claiming that investors of the Bloom ICO had expectations of making a profit based on Bloom’s roadmap of establishing a platform that would increase the value of the BLT token.

So far, it seems that Bloom is taking the easy route and is agreeing to register the token as a security, but that does not mean that the decision is correct.

After all, XRP was also accused of the same thing by the SEC and the lawsuit is currently progressing in Ripple’s favor significantly.

As a result of the news, the price of BLT already dropped by around 36% in the past 24 hours indicating that this news has sparked panic among investors.

At the time of writing, BLT is now priced around $0.0168.

FinanceFeeds concludes:

Under the settlement, the company has to pay the SEC $300,000, register its tokens as a security, and offer those that bought tokens in the ICO a refund.

If it doesn’t comply, Bloom will have to pay almost in total $31 million in disgorgement, interest, and civil penalties, which will be turned over to the SEC for eventual distribution to investors harmed by the ICO.

The SEC was careful to note that they had not accused Bloom of fraud, but rather of failing to register their tokens as securities.

In other crypto-related settlements, the SEC used different mechanisms to compensate investors who participated in an initial coin offering. Namely, the ICO issuer has either voluntarily returned all proceeds of the token sale or was required to go through a claims process.

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