Blockchain security firm Quantamp is set to return $28 million raised in a 2017 initial coin offering (ICO) following charges brought by the United States Securities and Exchange Commission.

The U.S. agency announced that it had formally charged the California-based firm on July 21 for conducting an unregistered ICO of “crypto asset securities.” According to the SEC’s statement, Quantstamp agreed to settle the charges.

The SEC’s order outlines how Quantstamp’s ICO, which took place in October and November 2017, raised over $28 million by selling its native QSP tokens to some 5,000 investors.

<em>Source: SEC filing against Quantstamp</em>

The platform intended to use its ICO proceeds to “develop and market” its automated smart contract security auditing platform. The SEC order highlighted its belief that Quantstamp emphasized the “large market potential” of its service, which led QSP buyers to expect the value of their tokens to appreciate in value.

According to the SEC, Quantstamp failed to register its offering and sale of QSP tokens, which the agency deemed to be securities.

“The SEC’s order finds that Quantstamp violated the registration provisions of the federal securities laws. Without admitting or denying the SEC’s findings, Quantstamp agreed to a cease-and-desist order and to pay disgorgement of $1,979,201, prejudgment interest of $494,314, and a civil penalty of $1 million.”

The outcome of the order also provisions the establishment of a “Fair Fund” to return funds to affected investors. The firm also agreed to transfer its own QSP token holdings to the Fair Fund administrator, with the tokens set to be “permanently disabled or destroyed.”

The SEC order also notes that Quantstamp no longer operates or actively supports the automated smart contract security auditing following its deployment in June 2019.

Cointelegraph has reached out to Quanstamp for further details following the SEC’s Order.

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