The Securities and Exchange Commission SEC has sent a cease and desist letter to Bloom Protocol BLT asking it to register its token as securities or risk up to $31 million in fines.
The SEC accused Bloom of violating the Securities Act by offering its BLT token through an initial coin offering ICO from Nov. 14, 2017 to Jan. 2, 2018 in a 18-sided letter sent on Aug. 9.
The SEC said the startup raised $30.9 million from 7,358 investors worldwide. The firm had to refund those who bought its BLT token before January 2, 2018 a failure to do this meant that the firm would have to pay all fines to the SEC.
The SEC noted that Bloom took remedial actions like registering BLT as securities, retaining an auditor to start the audit of its entities, and hiring full-time employees to fast-track the auditing and compliance necessary before registration.
In 2017 the Bloom Protocol was founded in hopes of revolutionizing the credit scoring industry using the technology of the digital ledger.
The commission said participants in its ICO bought BLT on the reasonable expectation of a future profit based on Bloom's efforts to create an online identity attestation system that will increase the token's value on criptocurrency asset trading platforms. BLT qualifies as unregistered securities as it was not registered with the commission and did not meet the requirements for exemptions from such registration, according to the SEC.
The BLT, which peaked at $1.51 in May 2018, dropped 36.4% in the last 24 hours. It is now trading at $0.0168.