On Feb 4, 2019, it was announced that Douglas Lopes had been appointed as the global Chief Financial Officer (CFO) at Airfox.
This appointment follows less than three months after the company settled with the U.S. Securities Exchange Commission (SEC) and Massachusetts Securities Division (MSD). As a result of the settlement, Airfox was forced to register its AirTokens (AIR) as a security and pay a number of monetary penalties.
Airfox Vs. the SEC
In 2016, Airfox was created to provide financial services to the underbanked and unbanked people of the world. This was to be accomplished using a mobile app and AIR. Currently, the mobile app has been deployed in Brazil, where Airfox reports a $39 billion annual market potential providing financial services to the unbanked.
To support the initiative, Airfox hosted an ICO sale in 2017. The sale was completed on Oct. 5 with around $15 million raised from over 2,500 investors. Approximately 1.06 billion AIR were sold.
This information was published in a cease and desist order presented to Airfox on Nov 16, 2018. There, it was alleged that AIR was a security offering sold in America and across the world by an American company without proper registration.
The case could have been taken to court, but Airfox instead settled with the SEC to whom it paid an alleged $250,000 civil penalty. Another $100,000 was supposedly paid to the MSD while an undetermined amount of funds have been returned to investors who purchased tokens before Oct 5, 2017. Refunds were given by completing a claim form and providing proper documentation of purchase. Furthermore, Airfox was forced to register AIR as a class of securities. Trading of AIR ceased until registration is complete.
Despite, these enforcement actions, the Airfox app has been deployed in Brazil where users can pay bills, receive loans, send capital, and much more. A reward system for watching advertisements is expected to be launched in the future.
Furthermore, the appointment of Lopes as global CFO suggests that Airfox may be planning operations in countries other than Brazil. Two countries that are likely for future operations are Mexico and India, which are both listed on Airfox’s website with a reported $24 billion and $12 billion annual market potential respectively.
ParagonCoin (PRG), developed for the cannabis industry, was also labeled a security offering by the SEC in Nov 2018. Like Airfox, Paragon settled with the SEC. Neither of these cases ever made it to court, and the SEC still has failed to explain the difference between a securitized and non-securitized ICO offering.
Similarly, Blockvest was targeted by the SEC who filed an injunction against the company on Oct 3, 2018. As a result, Blockvest was unable to successfully complete its ICO. In contrast to Paragon and Airfox, Blockvest didn’t settle but instead went to court against the SEC. On Nov 28, 2018, Judge Curiel of the U.S. District Court for the Southern District of California went against the SEC ruling that the Blockvest ICO was not a security offering.
Kin, a cryptocurrency developed by Kik, has also been targeted by the SEC. The KIN ICO which raised over $100 million might possibly be classified as a security offering after a vote from the SEC commissioners. When this vote is to take place, has not yet been announced. Kik’s primary argument against the SEC is that KIN is a currency, which is exempt from consideration as a security according to the 1934 Securities Exchange Act.
Airfox’s AIR also appears designed like a currency developed to support the movement of capital to the unbanked and underbanked in areas of the world lacking financial resources. However, Airfox did not use this argument against the SEC.
Instead, the company simply accepted the verdict, settled, and continued business as planned. It appears that fighting the SEC may not have been in the interest of Airfox who appears to be growing and planning new ventures across the world with the most recent appointment of Lopes.
Will either side win the war of ICOs against the SEC? Will the two be able to coexist peacefully in the future? Let us know your thoughts in the comments below!