SEC imposes $8.4 million penalty on digital coin issuers

The Securities and Exchange Commission imposed a penalty of $8.4 million and ordered disgorgement of $1.74 million in connection with a settlement with Bitqyck Inc. and its founders, who allegedly defrauded investors in securities offerings of two digital assets. The Dallas-based company and founders Bruce Bise and Sam Mendez operated an unregistered exchange to permit trading in one of the assets, a digital token called Bitqy, the SEC said in a release. According to the SEC's complaint, Bitqyck and the two founders created and sold Bitqy and BitqyM in unregistered securities offerings to more than 13,000 investors, raising more than $13 million. Investors allegedly received $4.5 million for referring new investors to Bitqyck but collectively lost more than two-thirds of their investment, the SEC said. [More: Debate on crypto oversight intensifies as SEC clashes with Facebook over Libra] The SEC's complaint alleges that the founders misrepresented QyckDeals, a daily deals platform using Bitqy, as a global online marketplace and falsely claimed that each Bitqy token provided fractional shares of Bitqyck stock through a "smart contract." The complaint alleges that the defendants falsely told investors that BitqyM tokens provided an interest in a Bitqyck cryptocurrency mining facility powered by below-market-rate electricity. In truth, Bitqyck did not have access to discounted electricity and didn't own a mining facility, the SEC said, alleging that the company, with the help of its founders, also illegally operated TradeBQ, an unregistered national security exchange offering trading in a single security, Bitqy. [Recommended video: Biggest changes advisers should make to be successful in the future]​ Bitqyck consented to an order requiring that it pay disgorgement, prejudgment interest and the $8,375,617 civil penalty. Mr. Bise and Mr. Mendez consented to pay disgorgement, prejudgment interest and a civil penalty of $890,254 and $850,022, respectively. [More: As popularity of cryptocurrencies increased, so did consumer complaints]​