Emergent Tech

SEC sends ICO for restaurant app Munchee back to the kitchen

Rules that offering was a cryptocurrency speculation, not real attempt to fund app

By Shaun Nichols in San Francisco


The US Securities and Exchange Commission has intervened to stop an initial coin offering (ICO) that attempted to raise US$15m for a restaurant review app named "Munchee".

The regulator served Munchee Inc. with a cease and desist order [PDF] to halt the offering on grounds it was an unregistered security.

Munchee tried to sell "MUN Tokens", a form of digital currency that would be used by both reviewers and restaurants to unlock premium features in the app and to buy advertisements.

The idea behind the sale was that Munchee would use the $15m to grow its business and recruit more users, increasing the value of the MUN Tokens in the process and allowing the investors to resell the tokens for a profit.

The Commission (SEC) did not find that prospect appetising, or legal, and decided the ICO was a cryptocurrency investment in its own right aimed at speculators.

"Munchee and its agents targeted the marketing of the MUN tokens offering to people with an interest in tokens or other digital assets that have in recent years created profits for early investors in ICOs," the SEC said in its order.

"This marketing did not use the Munchee App or otherwise specifically target current users of the Munchee App to promote how purchasing MUN tokens might let them qualify for higher tiers and bigger payments on future reviews. Nor did Munchee advertise the offering of MUN tokens in restaurant industry media to reach restaurant owners and promote how MUN tokens might let them advertise in the future."

Because the tokens meet the definition of investment contracts, the SEC ruled the sale of tokens was an authorized securities transaction.

The commission said that upon receiving the order, Munchee halted the sale and ensured no tokens were distributed. Refunds have been issued to investors who ordered tokens. The SEC noted Munchee's cooperation with the order in saying it would not impose any additional penalties.

The shutdown is the second major action announced this month by the SEC's newly-created Cyber Unit, a group assigned to investigate and prosecute securities fraud in ICOs, distributed ledger tech, and social media.

The SEC also warned, just yesterday, December 11th, that it was on the lookout for ICOs that looked and quacked and walked like securities, and intended to roast those who offer them. ® ®

Sign up to our NewsletterGet IT in your inbox daily


More from The Register

German e-government SDK patched against ID spoofing vulnerability

Alice becomes Bob

Good lord, Kodak's stock is up 120 per cent. How? New film? Oh. It launched a crypto-coin

Sigh, 2018. Sigh

Kodak teases smartphone

OpenFlow protocol has a switch authentication vulnerability

It's old, it's everywhere and it's not likely to be fixed in a hurry

Apache Hadoop spins cracking code injection vulnerability YARN

Loose .zips sink chips 2: Electric Boogaloo

SoftNAS no longer a soft touch for hackers (for now)... Remote-hijacking vulnerability patched

Your files are someone else's files, too, thanks to storage bug

Australia, US and Japan want Huawei local submarine cable project

'Competition' and 'alternatives' offered to change Papua New Guinea government's mind

Git security vulnerability could lead to an attack of the (repo) clones

Best git patching y'all

Australia, Solomon Islands to ink Huawei-free cable contract today

Spook-driven paranoia? No, it's just friendly competition, honest

John McAfee ‘goes underground’ in motorcade to flee SEC

Babbles about subpoenas, corruption, corrupt pyramidal power structures and so much more