The Securities and Exchange Commission (SEC) has sent a cease and desist letter to Bloom Protocol (BLT), asking it to register its tokens as securities or risk up to $31 million in fines.
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.
Bloom agrees to register with 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.
According to the commission, participants in its ICO bought BLT on “the reasonable expectation of obtaining a future profit based upon Bloom’s efforts in using the proceeds from the offering to create an online identity attestation system that would increase the token’s value on crypto asset trading platforms.”
BLT qualifies as unregistered securities as it was not registered with the commission and did not meet the requirements for exemptions from such registration, according to the SEC.
Following the news, BLT, which peaked at $1.51 in May 2018, dropped 36.4% in the last 24 hours. It is now trading at $0.0168.