BitClave Search Engine Agrees to Pay Back $25M ICO in Settlement With SEC

BitClave will pay back over $25 million in a settlement with the SEC stemming from a 2017 token sale.

AccessTimeIconMay 28, 2020 at 7:44 p.m. UTC
Updated Sep 14, 2021 at 8:46 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

BitClave, a California startup whose Ethereum-based search engine raised $25.5 million in a 2017 token sale, will pay back its 9,500 investors in a settlement with the U.S. Securities and Exchange Commission (SEC).

The settlement ended BitClave’s court saga almost as soon as it began. Prosecutors with the SEC announced their charges Thursday in tandem with an order that called BitClave’s Consumer Activity Token (CAT) sale an unregistered initial coin offering (ICO).

BitClave neither admitted nor denied that it broke the law when it sold CAT in 2017. In exchange, the “blockchain services firm” will return all $25.5 million to the investors and pay nearly $4 million in additional fines and fees. 

CoinDesk reported in 2017 that CAT sales were meant to boost awareness of BitClave’s data-centric search engine alternative, the BitClave Active Search Ecosystem (BASE). At the time, founder Alex Bessonov described BASE as a transparent pairing of retailers and search engines. CAT was the carrot incentivizing BASE usage, Bessonov said. 

The SEC, however, called CAT something else: an investment contract.  

Thursday’s SEC order said CAT tokens were investment contacts because investors had a reasonable expectation CAT would appreciate in value as BitClave matured. The order quotes BitClave’s white paper:

“As more service providers join, the amount of CATs required for an equivalent service will gradually decrease, corresponding to a CAT value increase.”

As per the settlement, BitClave will transfer 1.32 billion uncirculated CAT for “permanent disabling” and request that exchanges delist it. CoinMarketCap showed YoBit.net as the only exchange carrying CAT at press time Thursday. The data site lists CAT’s market cap at $76,753.

“Issuers of securities, traditional or digital, must comply with the registration requirements of the federal securities laws,” Kristina Littman, the SEC’s cyber enforcement chief, said in a statement. “The remedies ordered by the SEC will provide meaningful relief to investors in this unregistered offering.”

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.