SEC Pushes ICO to End ICO – Protostarr Shutting Down Midway of Token Sale

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In what appears to be a first, an ICO project is shutting down and issuing a refund in the midst of their campaign due to contact by the US Securities and Exchange Commission.

Reached by phone by Laura Shin according to a Forbes article, Protostarr CEO Joshua Gilson said that on August 24:

“[The SEC investigators] called and asked for me to volunteer a bunch of information about the company. They gave me a quick little brief: They’re both federal investigators, anything I say has to be truthful or honest, I could be prosecuted for providing false information — a bunch of stuff like that, so immediately, I said, I would like to be open with you guys but this is sounding like an ‘I should get a lawyer’ kind of conversation.”

Protostarr, claimed to be a new evolution for the world of digital media investing – changing the model from donation or sponsorship to investment.

This decentralized crowd investment and earnings distribution DApp (Decentralized Application) would connect  investors with rising internet celebrities, such as Youtubers, Twitch casters, and other video and live streaming platforms that share advertising and subscription revenue with content creators.

But by offering dividends and profit-sharing they were clearly offering a security and failed the Howey Test, created by the US Supreme Court for determining whether certain transactions qualify as “investment contracts.”

Under the Howey Test, a transaction is an investment contract if:

  1. It is an investment of money
  2. There is an expectation of profits from the investment
  3. The investment of money is in a common enterprise
  4. Any profit comes from the efforts of a promoter or third party

From a post online from the company.

On August 24, 2017, we were contacted by the United States Security and Exchange Commission regarding the initial coin offering of Protostarr tokens to fund the development of our Ethereum decentralized application. After consultation with multiple lawyers, we have decided to cease further operations and refund Ethereum collected in our crowdsale that began on August 13, 2017.

Like many of our supporters, we were excited to be an innovative force in the emerging space of content creation and its funding. Unfortunately, as a startup, we do not have the necessary resources to both develop our DApp and challenge the SEC’s investigation regarding our ICO and its interpretation under US securities law.

Individuals who paid Ethereum to the crowdsale payment address will receive a refund to the originating wallet address. These originating wallet addresses are verifiable on the Ethereum blockchain that’s attached to the ICO contract at here.

Refunds will begin on September 02, 2017 for all incoming transactions made to the crowdsale wallet before the refund date.

For immediate inquiries related to the refund of payments, contact info@protostarr.io.

 

About Richard Kastelein

Founder of industry publication Blockchain News, partner at ICO services collective CryptoAsset Design Group (helped raise over $200m+), director of education company Blockchain Partners (Oracle Partner) and ICO event organiser at leading industry event  CryptoFinancing (first ICO event in Europe) - Richard Kastelein is an award-winning publisher, innovation executive and entrepreneur. He sits on the advisory boards of half a dozen Blockchain startups and has written over 1200 articles on Blockchain technology and startups at Blockchain News and has also published pioneering articles on ICOs in Harvard Business Review and Venturebeat.
 
Kastelein has spoken (keynotes & panels) on Blockchain technology in Amsterdam, Antwerp, Barcelona, Beijing, Brussels, Bucharest, Dubai, Eindhoven, Gdansk, Groningen, the Hague, Helsinki, London, Manchester, Minsk, Nairobi, Nanchang, San Mateo, Shanghai,Tel Aviv and Venice. His network is global and extensive.
 
He is a Canadian (Dutch/Irish/English/Métis) whose writing career has ranged from the Canadian Native Press (Arctic) to the Caribbean & Europe. He's written occasionally for Harvard Business Review, Wired, Venturebeat, The Guardian and Virgin.com and his work and ideas have been translated into Dutch, Greek, Polish, German and French.
 
A journalist by trade, an entrepreneur and adventurer at heart, Kastelein's professional career has ranged from political publishing to TV technology, boatbuilding to judging startups, skippering yachts to marketing and more as he's travelled for nearly 30 years as a Canadian expatriate living around the world.
 
In his 20s, he sailed around the world on small yachts and wrote a series of travel articles called, "The Hitchhiker's Guide to the Seas' travelling by hitching rides on yachts (1989) in major travel and yachting publications. He currently lives in Groningen, Netherlands where he's raising three teenage daughters with his wife and sailing partner, Wieke Beenen.

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