The United States Securities and Exchange Commission (SEC) announced today that it’s settled its case against the Seattle-based crypto esports betting company Unikrn Inc., who will have to pay a fine of $6.1 million to the U.S. government. Unikrn carried out an unregistered Initial Coin Offering (ICO), according to the SEC’s complaint, which was a clear violation of U.S. federal securities law.
The violation took place in the summer of 2017, at the height of the cryptocurrency bubble. During that time, Unikrn raised $31 million by selling the UnikoinGold (UKG) token, claiming the token was an investment opportunity. The digital token ran on the Ethereum blockchain.
“Unikrn promised investors that it would facilitate a secondary trading market for the tokens and that its efforts to increase the usages for the UKG token would increase demand for and in turn, the value of, the tokens,” the SEC said in a press release. “The order finds that Unikrn offered and sold UKG as investment contracts, which constituted securities, yet failed to register the offering or qualify for an exemption.”
The company will pay the $6.1 million penalty to the U.S. federal government and will have to disable the trade of the digital asset token on their platforms. Additionally, the SEC ordered that Unikrn set up a “Fair Fund” to distribute assets back to injured investors.
“The securities registration and exemption framework is designed to ensure investor protection and access to material information, while also facilitating capital formation. Failure to follow this framework harms investors and our markets,” said Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit. “This resolution allows us to return substantially all of Unikrn’s assets to already-harmed investors and includes measures to prevent future sales to retail investors, including the disabling of the tokens.”
The SEC also announced that the Washington State Department of Financial Institution reached a settlement with Unikrn for an undisclosed amount in related proceedings.
Unikrn has been an active participant in the esports community for some time. In 2016, Unikrn invested in Berlin International Gaming, a prominent CS:GO organization. Most recently, Unikrn teamed up with esports data firm GRID in June to create an “esports prize draw,” which featured a top prize of $1.1 million.