ICO issuer Black Cell Technology Limited (Black Cell) announced that it has halted its initial coin offering (ICO) to the Hong Kong public and agreed to unwind ICO transactions for Hong Kong investors by returning them the relevant tokens following regulatory action by the Hong Kong Securities and Futures Commission (SFC) over concerns that Black Cell had engaged in potential unauthorized promotional activities and unlicensed regulated activities.
In addressing SFC’s regulatory concerns, Black Cell has also undertaken not to devise, set up or market any scheme that constitutes a Collective Investment Scheme (CIS) unless in compliance with the relevant requirements under the Securities and Futures Ordinance (SFO).
The SFC found that Black Cell had promoted an ICO to sell digital tokens to investors through its website accessible by the Hong Kong public, with the pitch that the ICO proceeds would be used to fund the development of a mobile application and holders of the tokens would be eligible to redeem equity shares of Black Cell.
The SFC considers such arrangement may constitute a CIS under the circumstances.
Where an ICO involves an offer to the Hong Kong public to acquire an interest or participate in a CIS, prior authorization or licensing requirements under the SFO may be triggered unless an exemption applies. An interest in a CIS is regarded as “securities” as defined in the SFO.
Parties engaging in ICO activities are reminded to seek legal or other professional advice if they are in doubt about the applicable legal and regulatory requirements. Investors are again reminded to exercise caution before participating in ICO.