On August 12, 2019, the SEC issued an order instituting cease-and-desist proceedings pursuant to Section 8A of the Securities Act of 1933, making findings, and imposing a cease-and-desist order with respect to SimplyVital Health, Inc. (“SimplyVital”) in connection with token sales allegedly conducted in violation of Sections 5(a) and 5(c) of the Securities Act. The order was part of a settlement between SimplyVital and the SEC.
SimplyVital is the creator of Health Nexus, “a health care-related blockchain ecosystem” through which healthcare providers can share patient data. In late 2017, SimplyVital announced its intention to conduct an ICO to raise capital for further development of HealthNexus. From September 2017 through April 2018, SimplyVital raised approximately US $6.3 million through a “presale” of its token called “Health Cash,” which investors purchased through Simple Agreements for Future Tokens (“SAFTs”). SimplyVital stated that, in conducting the presale, it was relying on the exemption provided by Section 4(A)(2) of the Securities Act and Regulation D and/or the safe harbor provided by Regulation S for offers and sales that occur outside of the United States.
The SEC determined that the presale of Health Cash was an unregistered securities offering that was not subject to any exemption or safe harbor because (among other things): (1) SimplyVital was aware that a number of purchasers were pooling funds from various unknown individuals for the purpose of participating in the presale and made no efforts to determine the accredited investor status of those individuals and (2) SimplyVital permitted certain non-U.S. investors, who provided the majority of the proceeds of the presale, to purchase securities without undertaking any accredited investor verification.
The SEC contacted SimplyVital and provided its views before SimplyVital issued any tokens. In response, SimplyVital voluntarily returned the proceeds of the presale. Although the SEC required SimplyVital to cease and desist from further violations, the SEC did not impose a monetary penalty. SimplyVital did not admit or deny the SEC’s findings.