SEC Settles With Decentralized Storage Network

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The United States Securities and Exchange Commission (SEC) is tying up some loose ends in an investigation and nailing bad guys all day. On October 1, the financial watchdog posted a press release revealing that it had reached a settlement with Nebulous, the firm which developed the infamous Sia decentralized cloud storage network. 

An unregistered token sale

The entire debacle traces back to the sale of Sia stock back in 2014; a sale which the company had advertised as providing “a guaranteed income proportional to the value of storage being rented from the Sia network.” 

Two days after Nebulous announced the sale, it began selling Sianotes that could be converted into stock after the Sian network launched. The offering was hosted on Bitcointalk.org, with about 1,250 notes sold at a $96 average price.

As the SEC notes, “Sianotes and, as contemplated, Siastock were securities.” The company failed to register the offering and never “took steps” to confirm Sianote buyers were qualified investors. As part of the agreement reached, the Boston-based blockchain firm has agreed to pay $225,000 in fines. The fine will consist of disgorgement of $120,000, a civil money penalty of $80,000, and prejudgment interest of $24,602. 

In addition to the settlement, Nebulous will also not be required to register the Siacoin utility as a security. The coins are ideally to be sued in the Sia ecosystem to purchase and sell cloud storage space.

Currently, Cooley LLP, Nebulous’ legal representatives, claims that the Sia network is being used by about 323 hosts in 43 different countries. File contracts that have been stored so far are also reported to total over 500 terabytes.

Zach Herbert, the Chief Operations Officer at Nebulous, reportedly claimed that while the steepness of the penalty was a disappointing turn of events, the company views the settlement as a positive nonetheless.

He added,

“By choosing not to take action against Siacoins, we believe the SEC has validated Sia’s two-token model. We will continue to build and improve the Sia network at a rapid pace.”

SEC settles with Block.one

The settlement is coming just a day after the SEC agreed on terms with Block.one, the blockchain company which developed the EOS network and crypto token. 

On Monday, the SEC announced that it had settled the charges against Block.one, also in the form of a civil monetary penalty. Per the release, Block.one conducted an ICO of 900 million tokens, which, although it raised about $4 billion, wasn’t registered as a securities offering in agreement with federal laws in the country. 

At the end of the inquiry, Block.one agreed to make a $24 payment, although the blockchain firm didn’t agree or deny any of the agency’s findings.

Stressing the importance of compliance to securities laws, Stephanie Avakian, the Co-director of the SEC’s Division of Enforcement, said, “A number of U.S. investors participated in Block.one’s ICO. Companies that offer or sell securities to U.S. investors must comply with the securities laws, irrespective of the industry they operate in or the labels they place on the investment products they offer.”

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About Jimmy Aki

Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.

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