SEC disburses $4.6 million to BitClave ICO investors amid unresolved fund discrepancies

Despite BitClave's agreement to contribute nearly $29 million, discrepancies in the fund's total raise unanswered questions.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

The US Securities and Exchange Commission (SEC) has distributed $4.6 million to investors of defunct crypto startup BitClave’s 2017 initial coin offering (ICO), according to a Nov. 20 announcement.

The funds were disbursed as part of the BitClave Fair Fund established after a 2020 settlement. The firm halted its operations in 2020 after the SEC took legal action against it over allegations of violating securities laws during the ICO.

BitClave ICO

BitClave raised $25.5 million in just 32 seconds during the height of the 2017 ICO boom, selling its Consumer Activity Token (CAT) to thousands of investors.

However, the SEC, under then-Chair Jay Clayton, filed charges in 2020, alleging that the offering constituted an unregistered securities sale. BitClave settled without admitting wrongdoing and agreed to surrender the $25.5 million raised, along with an additional $4 million in interest and penalties.

As part of the settlement, BitClave also agreed to destroy uncirculated CAT tokens and requested that exchanges delist the digital assets. The total amount allocated to the Fair Fund was intended to compensate affected investors.

Discrepancies unaddressed

Eligible claimants were required to submit claims by August 2023, with the SEC notifying applicants of their status by March 2024.

Despite BitClave’s agreement to contribute nearly $29 million to the fund, the company had paid only $12 million as of February 2023, according to SEC records.

The SEC did not address discrepancies between the amount in the Fair Fund and the disbursement totals, leaving questions about the remaining $7.4 million unresolved. Neither the SEC nor the fund administrator have provided comments on the matter.

The BitClave case highlights the regulatory scrutiny surrounding the ICO era and reinforces the SEC’s commitment to protecting investors. The agency’s statement on Nov. 20 assured eligible recipients that compensation is underway, signaling a step forward in resolving one of the ICO boom’s many legal challenges.