The U.S. Securities and Exchange Commission (SEC) has distributed $4.6 million to investors of defunct crypto startup BitClave’s 2017 Initial Coin Offering (ICO), according to a Nov. 20 announcement.
The money was paid out as part of the BitClave Fair Fund, established after a settlement in 2020. The company ceased operations in 2020 after the SEC took legal action against the company over allegations of violating securities laws during the ICO.
BitClave ICO
BitClave raised $25.5 million in just 32 seconds during the height of the 2017 ICO boom, selling its Consumer Activity Token (CAT) to thousands of investors.
However, the SEC, under then-Chairman Jay Clayton, filed suit in 2020, alleging that the offering constituted an unregistered sale of securities. BitClave settled without admitting wrongdoing and agreed to forfeit the $25.5 million it collected, along with another $4 million in interest and penalties.
As part of the settlement, BitClave also agreed to destroy uncirculated CAT tokens and requested that the exchanges delist the digital assets. The total amount allocated to the Fair Fund was intended to compensate affected investors.
Unaddressed discrepancies
Eligible claimants were required to file their claims by August 2023, with the SEC notifying applicants of their status by March 2024.
Despite BitClave’s agreement to contribute nearly $29 million to the fund, the company had paid just $12 million as of February 2023, according to SEC records.
The SEC did not address the discrepancies between the amount in the Fair Fund and the payout totals, leaving questions about the remaining $7.4 million unresolved. Neither the SEC nor the fund manager have commented on this.
The BitClave case highlights regulatory scrutiny surrounding the ICO era and reinforces the SEC’s commitment to protecting investors. The agency’s statement on November 20 assured eligible recipients that compensation is on the way, marking a step forward in solving one of the ICO boom’s many legal challenges.