SEC Files Lawsuit Against Quantstamp Over $28M ICO

Quantstamp, a blockchain security company, has agreed to pay approximately $3.4 million to the Securities and Exchange Commission (SEC) for conducting an unregistered initial coin offering (ICO) which raised close to $28.35 million in ether and stablecoin USD from more than 5,000 investors in 2019. This offering included the sale of Quantstamp’s QSP token.

According to the SEC statement from July 21, Quantstamp released a white paper in 2017 that described its plans of creating a protocol on the Ethereum blockchain for automated security audits of smart contracts.

During this offering, they publicly described the potential market for their product, leading purchasers to hope for high returns related to the success of Quantstamp’s enterprise.

The SEC used the Howey Test to determine whether the cryptocurrency was considered a security akin to securities laws.

The Howey Test and its four prongs include whether there is an expectation of profits which comes from the efforts of others, a common enterprise, or an investment of money. Quantstamp did not admit or deny the charges, however, they did agree to a fair fund to return the money to investors.