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Veritaseum isn’t backing down from the U.S. Securities and Exchange Commission, as the number of enforcement actions related to the 2017 ICO craze continue to pile up.
The SEC filed an emergency lawsuit last week against Veritaseum in a New York federal court and obtained a temporary restraining order to freeze $8 million in remaining ICO funds held by Veritaseum and CEO Reginald Middleton.
Yesterday, Middleton made public his company’s response to the SEC’s lawsuit—a 423-page document that attempts to answer the Commission’s allegations that Veritaseum conducted an unregistered securities offering and subsequently moved $2 million in an attempt to dissipate funds after being served with a Wells notice on August 12.
Much like the few other crypto startups, such as Kik, that are challenging the SEC’s allegations in court rather than settling their charges, Veritaseum’s response insists that the company’s VERI tokens do not represent securities. Further, the company claims that the movement of 10,000 Ether (worth $2 million at the time) in ICO funds after being notified of the enforcement action "was merely the funding of Veritaseum’s ongoing business operations."
In its filing, Veritaseum is asking the court to unfreeze its assets and lif the TRO. "The temporary freeze in this case has already caused significant harm to the holders of Veritaseum’s utility tokens, the very people the SEC is purportedly seeking to protect," Veritaseum said in its response. Potential harm to token holders is the very same line of reasoning that Kik, perhaps not coincidentally, used in its initial response to the SEC’s Well notice.
A token misunderstanding
The SEC’s investigation of Veritaseum began in the summer of 2017, during which Veritaseum raised $14.8 million in a crowdsale lasting from 2017 into early 2018. The lawsuit alleges that funds were raised on the premise that VERI was a utility token providing access to "products ready to go to market that would replace brokers, banks, and hedge funds."
According to the SEC, the company mischaracterized VERI tokens as utility tokens, manipulated the market for VERI Tokens, and attempted to dissipate ICO funds after receiving the Wells notice.
Veritaseum describes itself as enabling "software-driven P2P capital markets without brokerages, banks or traditional exchanges." Products include VeADIR: Veritaseum Autonomous Dynamic Interactive Research, which pays Veritaseum for "real world research," a vehicle for renting VERI tokens, subtoken creation, and access to the Financial Machine portfolio.
Named for Veritas, the Roman goddess of truth, Veritaseum and its executives appear to think their version of the truth will outweigh the SEC's in court.