Three media companies settled SEC charges for conducting unregistered stock and digital asset securities offerings.
In its Order, the SEC stated that the three companies solicited investments from thousands of people, including U.S. investors, for an offering of two of the companies' (the "G Entities") common stock. The SEC found that the G Entities claimed to have created a social media platform to provide news coverage that would be "the only uncensored and independent bridge between China and the Western world." In addition, the SEC determined that the G Entities solicited investments for their offering of digital tokens that the two companies claimed could be used for transactions on the social media platform.
The SEC determined that the G Entities have yet to develop a mechanism for their platform to accept payment through the digital tokens. The SEC also found that in their solicitation of investments, the G Entities represented the digital token offering as one with a potential for significant investment returns.
The SEC concluded that the G Entities violated Sections 5(a) ("Sale or delivery after sale of unregistered securities") and 5(c) ("Necessity of filing registration statement") of the Securities Act.
To settle the charges:
- the three companies agreed to (i) cease and desist from future violations and (ii) comply with the undertakings outlined in the Order;
- the G Entities agreed to (i) jointly and severally disgorge $434,134,141 in investor funds, plus $15,776,488 in prejudgment interest, and (ii) each pay a $15 million civil money penalty; and
- the non-G Entities company agreed to (i) disgorge $52,610,922, plus $1,911,877 in prejudgment interest, and (ii) a $5 million civil money penalty.
The G Entities settled parallel New York Attorney General ("NYAG") charges that required the companies to pay $479.9 million. The NYAG allowed the G Entities to credit the payments they make for the SEC settlement towards the NYAG's settlement, which will be allocated for return to the impacted investors.
Primary Sources
- SEC Order: GTV Media Group, Inc., Saraca Media Group, Inc. and Voice of Guo Media, Inc.
- NYAG Press Release: Attorney General James Secures Nearly Half a Billion Dollars to Resolve Illegal Stock and Cryptocurrency Sales
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
