In Securities and Exchange Commission v. ICOBox et al,[1] the Securities and Exchange Commission (“SEC”) alleges that defendant ICOBox and its founder, Nikolay Evdokimov violated Sections 5(a) and 5(c) of the Securities Act by selling $14.6 million in unregistered securities within and outside the United States.  ICOBox bills itself as an ICO[2] incubator that provides legal, technological, and marketing support to blockchain-based startups and sold its own tokens, “ICOS,” beginning in August 2017 to fund its consulting activities.[3]  The SEC alleges that defendants, in helping other entities offer and sell securities, also violated Section 15(a) of the Exchange Act by operating as an unregistered broker.  The defendants touted the value of the ICOS tokens as “discount cards” that allowed holders to swap their “ICOS tokens at a roughly one-to-four rate for tokens that would be issued during future ICOs by ICOBox’s clients.”[4]

Although ICOBox’s token-sale is relatively unremarkable (i.e. touting potential profits for purchasers, offering early purchase discounts, etc.), the complaint is notable for several reasons.  First, the SEC highlights that the defendants were on notice that their tokens were securities because their ICO took place after the SEC issued its DAO Report in July 2017.  This demonstrates the SEC’s unwillingness to accept ignorance of the legal status of digital tokens and its commitment to rejecting unfounded claims of a token offering “utility.”  Second, the action highlights the SEC’s growing willingness to target non-fraudulent entities—the ICOBox platform launched and functioned as intend, though it did not generate as much business as defendants promised it might.  Finally, the complaint alleges that one of ICOBox’s clients was Paragon Coin, the target of an earlier SEC enforcement action in which Paragon eventually settled with the SEC and agreed to register its tokens as securities.[5]  This certainly suggests that the SEC is focused on scrutinizing industry activity with ties to its early enforcement targets.


[1] Case No. 2:19-cv-08066 (C.D. Cal. filed Sept 18, 2019) (“ICOBox”). A copy of the SEC’s complaint can be found here:

[2] The SEC defines an ICO or “initial coin offering” as a “fundraising event in which an entity offers participants a unique ‘coin,’ ‘token,’ or ‘digital asset,’ in exchange for consideration, often in the form of virtual currency—most commonly bitcoin and ether—or fiat currency. The tokens are issued and distributed on a ‘blockchain’ or cryptographically secured ledger.” See ICOBox, ECF No. 1, ¶ 21.

[3] The defendants’ tokens are now allegedly trading at 1/20th of the average purchase price.

[4] ICOBox, ECF 1 ¶ 46.

[5]Paragon Coin, Inc., Securities Act Release No. 10,574, Admin. Proc. File No. 3-18897 (November 16, 2018), available at