SEC Voids Munchee $15 Million ICO As “Unregistered Security” – Refunds Issuedbr>
The US Securities and Exchange Commission (SEC) has ordered a California company to refund tokens sold in a $15 million initial coin offering (ICO).
Munchee was envisioned as a “Yelp Meets Instagram” that would be used to source restaurant reviews. The MUN token would be an incentive for activity on its network. Munchee used reviews and recommendations of individual restaurant dishes via photo and videos to create the MuncheePlatform, a blockchain social platform.
The platform hoped to disrupt traditional restaurant review sites such as Yelp, FourSquare, Google Places, and Zagat by introducing a blockchain user review process that was based around a crypto-token to incentivize ecosystem participants.
Users would receive MUN tokens for actions within the application, including approved, peer-reviewed food recommendations. Tokens would then be publicly traded or could be redeemed for special offers from restaurants and, eventually, from food delivery services.
To incentive users to hold their tokens, the company planned to introduce a tiered rewards program for users that would be based upon the amount of MUN tokens a user was holding on the ethereum blockchain. The higher the tier, the more rewards a user would receive for actions on the platform.
Block Tribune talked with Dr. Sanjeev Verma, co-founder and CTO of Munchee, earlier this year about his plans.
The ICO was held in October. Yet the SEC said its cease-and-desist order dated Dec. 11 that MUN tokens were actually securities, because they constitute “investment contracts” under the SEC’s definition.
“Even if MUN tokens had a practical use at the time of the offering, it would not preclude the token from being a security. Determining whether a transaction involves a security does not turn on labelling[sic] – such as characterizing an ICO as involving a ‘utility token’ – but instead requires an assessment of ‘the economic realities underlying a transaction,'” the SEC wrote in the order.
Munchee Inc. provided refunds to investors after SEC officials made contact. The move follows an SEC crack down on the organizer of PlexCoin last week.
“In deciding not to impose a penalty, the Commission recognized that the company stopped the ICO quickly, immediately returned the proceeds before issuing tokens and cooperated with the investigation,” said Stephanie Avakian, co-director of the SEC’s Enforcement Division.