On Feb 20, 2019, the U.S. Securities and Exchange Commission (SEC) announced that it charged Gladius Network LLC with conducting an unregistered Initial Coin Offering (ICO), which the company self-reported to the SEC. According to information available to FinTelegram, the Israeli Gery “Gabi” Shalon and his Russian partner Vladislav Smirnov have been among the token investors.
The SEC purports that Gladius conducted an ICO in late 2017 which violated U.S. securities law. The Washington DC-based company raised approximately $12.7 million via the sale of its tokens to finance the development of a network for renting spare computer bandwidth to defend against cyberattacks. Gladius did not register its ICO under the federal securities laws, and according to the SEC, the ICO did not qualify for an exemption from registration requirements.
Gladius self-reported to the SEC’s Enforcement staff in the summer of 2018 and cooperated with the agency’s investigation. The SEC did not impose a penalty because the company self-reported the conduct, agreed to compensate investors and will register its tokens as a class of securities. Pursuant to the order, Gladius undertakes to return funds to those investors who purchased tokens in the ICO and request a return of funds. Gladius also will file required periodic reports with the Commission. Gladius consented to the order without admitting or denying the findings.
The case follows the Commission’s two recent ICO registration cases, in which companies agreed to pay penalties for similar registration violations and agreed to similar undertakings.