The United States Securities and Exchange Commission (SEC) has reached a settlement with crypto firm Quantstamp following allegations of violating securities law. Quantstamp agreed to settle with the SEC without admitting or denying the charges.
Quantstamp raised more than $28 million through its Initial Coin Offering (ICO) in October-November 2017, selling its native token QSP to nearly 5,000 investors, including those in the US. The SEC claimed that these QSP tokens were considered securities based on the Howey test, and Quantstamp’s failure to register them violated federal securities laws.
According to the SEC, during the ICO, Quantstamp promoted its automated smart contract security auditing platform as having significant potential. The firm allegedly led investors to believe that the success of the platform would greatly increase the value of the QSP tokens, persuading them to invest. The SEC believes that Quantstamp’s actions met the requirements of the Howey test.
Although the crypto firm filed for an exception from registering its offers and sales of QSP by arguing that sales to foreign investors were exempt from federal securities laws, it failed to qualify for this exception by selling to non-accredited US investors.
Despite a successful ICO, raising over $28 million, Quantstamp faced criticism from investors for accepting other forms of payment for audits instead of solely promoting the use of its QSP token. There were also signs indicating that the team had abandoned the project a few years after the ICO due to low activity.
Currently, the QSP token is trading at around $0.0108, a significant decline from its all-time high of $0.8664 in 2018.