Salt Lending has been ordered to create a process by which investors in its $47 million initial coin offering (ICO) can seek refunds.
The SEC released a court order document today concerning Salt Blockchain Inc, or Salt Lending. Salt settled with the SEC in anticipation of the cease-and-desist order, according to the statement. The SEC ruled Salt violated Sections 5(a) and 5(c) of the Securities act when Salt offered and sold tokens without having a registration statement filed or in effect with the SEC.
The company’s alleged actions violated Section 5(a) of the Security Act — making any interstate sell or carrying of unregistered security illegal. Salt is also said to have violated section 5(c), which deems it unlawful for any person to directly or indirectly sell unregistered security in interstate commerce. Per the court order, a proposed settlement stipulates that Salt neither admits or denies the findings.
In addition to having to register its tokens as a security, SALT must commit to a funds return process as part of a proposed settlement:
"On a date no later than sixty (60) calendar days after the date of the filing of the 1934 Act Registration, or on the date seven (7) days after the 1934 Act Registration becomes effective, whichever date is sooner (the earlier date being the “Effective Date”), distribute by electronic means reasonably designed to notify each potential claimant (“Distribution”), a notice and a claim form (the “Claim Form”), both of which shall be in a form not objected to by Commission staff, and both of which shall include a link to Salt’s filing page on EDGAR, informing all persons and entities that purchased Salt Tokens from Respondent before and including December 31, 2019, of their potential claims under Section 12(a) of the Securities Act, including the right to sue “to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if [the purchaser] no longer owns the security” and informing purchasers that they may submit a written claim on the Claim Form directly to Respondent at an address indicated on the Claim Form of a purchaser’s assertion of rights under Section 12(a) of the Securities Act, and that such claims must be submitted by a date certain (“Claim Form Deadline”); said Claim Form Deadline shall be the earlier of three (3) months from date that the Division of Corporation Finance notifies Respondent that the Division’s review of the Form 10 has been concluded or six (6) months from the Effective Date."
In June of 2017, Salt began an ICO that raised $47 million in funds by December of 2017. Salt then went on to raise an additional $1.2 million from post-ICO sale of Salt Tokens, according to the SEC ruling, but the company did not file a register statement for Salt Token sales or offers, nor did these offerings qualify for exemption from the registration.
In 2018, The Block reported that the SEC subpoenaed Salt to investigate whether the ICOs were an unregistered security and also how the firm spent its assets. Salt sold the last Salt Token on Aug. 16, 2019.
"Salt has cooperated with the SEC and has been working toward a settlement for many months. Throughout that time, Salt has continued to grow and has proven the viability of the lending business and technology described to investors in connection with the ICO," the firm said in a statement published Wednesday. "Now that the Company and the SEC have reached a settlement, Salt plans to expand its product offerings to include products focused on asset management and the preservation of wealth."
Editor's Note: This report has been updated with comment from Salt Lending.