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SEC Shuts Down Munchee ICO (techcrunch.com)

Posted by BeauHD on from the cease-and-desist dept.

The Securities and Exchange Commission has shut down Munchee, a company that built a $15 million token sale. According to TechCrunch, "The Munchee ICO aimed to fund the MUN coin, a payment system for restaurant reviews." However, the company "received a cease and desist from the SEC on December 11" because it constituted the offer and sale of unregistered securities. From the report: Within the SECs findings they noted that Munchee touted itself as a "utility" token which means that the company believed the MUN token would be primarily used within the Munchee ecosystem and not be used to fund operations. However, thanks to an application of the Howey Test (a Supreme Court finding that essentially states that any instrument with the expectation of return is an investment vehicle), the SEC found the Munchee was actually releasing a security masquerading as a utility. "Munchee offered MUN tokens in order to raise capital to build a profitable enterprise," read the SEC notice. "Munchee said that it would use the offering proceeds to run its business, including hiring people to develop its product, promoting the Munchee App, and ensuring 'the smooth operation of the MUN token ecosystem.'" The stickiest part? Munchee claimed that its coins would increase in value thanks to a convoluted process of growth.

In short, Munchee was undone by two things: depending on the token sale as a vehicle to raise cash for operations and using the typically spammy and scammy marketing efforts most ICO floggers use now, tactics taken directly from affiliate marketing handbooks. Fortunately, Munchee was able to return all $15 million to the 40 investors that dumped their coins into scheme.

5 of 43 comments (clear)

  1. SEC will shutdown bitcoin soon! by Joe_Dragon · · Score: 3, Funny

    SEC will shutdown bitcoin soon!

  2. Regardng bitcoin bubble by goose-incarnated · · Score: 3, Interesting

    I'm starting to think that bitcoin can't pop (I'm not a bitcoin fan - check my posting history). The reason I say this is because the 4/transactions per second prevent an actual run starting on the commodity we call bitcoin.

    In order to have the bubble pop you need large number of sell-offs. With the miniscule rate of transactions it might not be possible for the bubble to pop spectacularly - it might simple deflate gently instead.

    --
    I'm a minority race. Save your vitriol for white people.
    1. Re:Regardng bitcoin bubble by jwhyche · · Score: 5, Insightful

      I've had thoughts like this too. The inherent flaws in the system might be enough to prevent a Wylie E. Coyote crash and burn. But again even if the bubble does simply deflate the result will still be the same. Millions will still be lost, it will just be drawn out and more painful.

      --
      I read at +2. If your post doesn't reach that level I will not see or respond to it.
    2. Re:Regardng bitcoin bubble by phantomfive · · Score: 2

      In order to have the bubble pop you need large number of sell-offs.

      The price doesn't drop because people "take their money out." The price drops because no one will buy it at that price.

      So for example, if you buy a tulip bulb at a price of $1million, then suddenly no one will pay more than $10 for a tulip bulb, everyone with that kind of tulip bulb will lose their money. The bubble doesn't shrink, it shatters, and the money was already gone (into the pockets of those who sold before the bubble popped).

      --
      "First they came for the slanderers and i said nothing."
    3. Re:Regardng bitcoin bubble by Hognoxious · · Score: 2

      Not 100% sure of this, but imagine only one tulip bulb can be sold per week. We wouldn't know what price people are unwilling to buy it at, because by the time they did (or didn't) buy it the price would have changed.

      --
      Confucius say, "Find worm in apple - bad. Find half a worm - worse."