The U.S. Securities and Exchange Commission has fined a Russian firm for publishing positive initial coin offering pitches without disclosing it was taking payment for doing so.

ICO Rating is alleged to have published reviews for payment between December 2017 and July 2018. The SEC’s issue with the site, which marketed itself as “a rating agency that issues independent analytical research” for potential ICO investors, was that there was no differentiation between paid and legitimate reviews.

Where the case gets interesting, particularly for the precedent it sets for the promotion of ICOs, is that ICO Rating was accused of breaching Section 17(b) of the Securities Act of 1933 – the anti-touting law. The section of the act reads:

It shall be unlawful for any person. . . . to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.

Other sites have been investigated and fined for publishing paid articles concerning investment opportunities without disclosing the fact before, but this is the first time a site in the ICO business. Mark Roderick, a lawyer at Flaster Greenberg, warned that sites promoting ICOs without full disclosure could be targeted by the law in May 2018.

“The securities laws require promoters, including both people and entities, to disclose compensation they receive for touting investments so that potential investors are aware they are viewing a paid promotional item,” Melissa Hodgman, associate director of the SEC’s Enforcement Division, said in a statement Tuesday.  “This requirement applies regardless of whether the securities being touted are issued using traditional certificates or on the blockchain.”

ICO Rating, which is offline at the time of writing, paid $268,998 to settle matter — a civil pentalty of $162,000 and disgorgement and prejudgment interest of $106,998.

The ICO market has dropped off in 2019 after its boom during 2017 and into 2018, but ICOs still occur and the SEC continues to take action. On Aug. 13, the SEC obtained a restraining against Veritaseum, which raised $14.8 million in an initial coin offering in 2017, claiming that the ICO was engaged in illegal activity. The company is fighting the allegations and has since asked the court to lift a freeze on its assets.

Image: ICO Rating