On 25 November 2024, the United States Securities and Exchange Commission issued a detailed administrative order under the United States Securities Exchange Act of 1934. The order approved the payment of fees and expenses to the fund administrator responsible for managing the Fair Fund related to BitClave PTE Ltd. The Commission also authorised an expedited process for future payments to ensure the efficient distribution of funds to harmed investors.
The United States Securities and Exchange Commission had initiated enforcement proceedings against BitClave PTE Ltd. on 28 May 2020. The findings of the Commission revealed that between June 2017 and November 2017, BitClave PTE Ltd. conducted an initial coin offering to raise funds for the development of a blockchain-based search platform designed to deliver targeted consumer advertising. As part of this process, the company issued digital tokens referred to as Consumer Activity Tokens, also known as CAT.
BitClave PTE Ltd. raised approximately US $25.5 million through the initial coin offering. However, the United States Securities and Exchange Commission determined that the offering violated United States securities laws. Specifically, the company failed to file a registration statement as required by Sections 5(a) and 5(c) of the Securities Act of 1933. The digital tokens issued were considered securities, and the company sold them to thousands of investors without complying with mandatory registration requirements.
In response to these violations, the United States Securities and Exchange Commission ordered BitClave PTE Ltd. to pay US $25.5 million in disgorgement, US $3,444,197 in prejudgment interest, and a civil monetary penalty of US $400,000. The total monetary sanctions amounted to US $29,344,197. These funds were allocated to a Fair Fund established under the Sarbanes-Oxley Act of 2002 to ensure equitable distribution to the investors harmed by the unlawful offering.
On 22 April 2021, the United States Securities and Exchange Commission, acting through its Division of Enforcement, appointed Kurtzman Carson Consultants LLC as the administrator for the BitClave Fair Fund. The fund administrator’s responsibilities included evaluating claims, managing the distribution process, and ensuring that harmed investors received their allocated share of the funds.
The fund administrator’s appointment order initially set a bond amount as required by the regulations. This bond amount was later adjusted to align with the scale of the administration process. The role of Kurtzman Carson Consultants LLC as the fund administrator was critical in ensuring the transparent and efficient handling of the US $29,344,197 allocated to the Fair Fund.
The administrative order issued on 25 November 2024 approved payment for services provided by the fund administrator, Kurtzman Carson Consultants LLC, from 22 April 2021 to 29 February 2024. The fees and expenses incurred during this period totalled US $52,460.20. The United States Securities and Exchange Commission thoroughly reviewed these costs and deemed them reasonable.
The Commission authorised the Office of Financial Management to disburse the approved payment from the Fair Fund to the fund administrator. Additionally, to facilitate future payments, the Commission granted the Office of Financial Management the authority to approve and process payments for fees and expenses incurred by the fund administrator. This authorisation is contingent upon the total payments not exceeding the approved cost proposal submitted by the administrator.
The approval for payment and the streamlined process for future disbursements were issued in accordance with the rules established under the United States Securities Exchange Act of 1934. Specifically, the administrative order referenced Rules 1105(d) and 1105(e) of the United States Securities and Exchange Commission’s Rules of Practice. These rules provide a regulatory framework for the administration and management of Fair Funds to ensure accountability and transparency in compensating harmed investors.
The approval of this payment shows the commitment of the United States Securities and Exchange Commission to protect investors and uphold the integrity of the financial markets. The administrative order aims to ensure that the investors harmed by the unlawful actions of BitClave PTE Ltd. receive appropriate compensation from the Fair Fund. The authorisation for the Office of Financial Management to directly process subsequent payments ensures that the administrative process remains responsive to the needs of harmed investors.
(Source: https://www.sec.gov/files/litigation/admin/2024/34-101750.pdf)
