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Californian startup Munchee halts ICO after SEC intervenes

Munchee, a social networking app for food, has halted its initial coin offering (ICO) after agreeing to an order from the Securities and Exchange Commission (SEC), which found that its conduct constituted unregistered securities offers and sales.

The California-based company was raising capital for its blockchain-based food review service through the ICO. It was seeking $15 million in capital to improve an existing iPhone app centered on restaurant meal reviews and create an ecosystem in which Munchee and others would buy and sell goods and services using the tokens.

In its investigation, the SEC found that the company and its promoters emphasized that investors could expect an increase in value of the tokens and that they would take steps to create and support a secondary market for the tokens.

“Because of these and other company activities, investors would have had a reasonable belief that their investment in tokens could generate a return on their investment. As the SEC has said in the DAO Report of Investigation, a token can be a security based on the long-standing facts and circumstances test that includes assessing whether investors’ profits are to be derived from the managerial and entrepreneurial efforts of others,” the SEC clarified.

According to the official release, Munchee agreed to the SEC’s cease-and-desist order without admitting or denying the findings. The SEC’s order stated that the company has refunded investor proceeds after it intervened, before any tokens were delivered to investors.

Earlier this month, the SEC halted an ICO fraud that was being conducted by a company, PlexCorps. It marked the first charges filed by the SEC's new Cyber Unit, which was created in September.

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