The Securities and Exchange Commission ( SEC ) has sued ICOBox, and its founder Nikolay Evdokimov, for allegedly running an illegal token sale worth more $14.6 million .

According to the complaint , ICOBox raised the funds in 2017 to create a platform for issuing initial coin offerings ( ICOs ). The SEC says the firm sold its “ICOS” tokens to more than 2,000 investors without registering them as securities .

Defendants allegedly claimed the tokens would go up in value upon trading and that ICOS token holders would be able to swap them at a discount for other tokens available on the ICOBox platform.

The complaint says the ICOS tokens are virtually worthless and further alleges that ICOBox failed to register as a broker, but operated as one by facilitating ICOs for other startups . In total, these raised over $650 million for dozens of clients .

“By ignoring the registration requirements of the federal securities laws , ICOBox and Evdokimov exposed investors to investments, which are now virtually worthless, without providing information that is critical to making informed investment decisions,” said Michele Wein Layne, regional director of the Los Angeles Regional Office.

ICOBox and Evdokimov are charged with violating the registration requirements of the federal securities laws . The SEC is seeking injunctive relief, disgorgement with prejudgment interest, and civil money penalties.

Not the first time

As you might expect, this isn’t the first time the SEC has taken action against outfits it deems are operating outside the confines of its rules and regulations.

In November last year, it charged the founder of cryptocurrency trading platform EtherDelta, Zachary Coburn, with running an “unregistered national securities exchange .”

At the time, the order claimed EtherDelta facilitated more than 3.6 million trades for ERC20 tokens, many of which purportedly fall under local federal securities laws.

More recently, the SEC settled a fine with a Russian firm that was pushing ICOs without disclosing the fact that it had accepted payment to do so.

ICOs may no longer be in fashion these days, but the SEC is still doing its best to make sure the dodgy ones face the music .

Want more Hard Fork? Join us in Amsterdam on October 15-17 to discuss blockchain and cryptocurrency with leading experts .

The EOS mainnet nightmare: How not to launch a blockchain network

In a year-long initial coin offering (ICO) , Blockne raised $4 billion for its blockchain and smart contracts platform EOS.

It is worth noting that a host of such platforms already existed, but Blockne promised a more scalable solution for decentralized applications (DApps). The only problem is, one year later, the EOS network is still not a reality.

EOS’s mainnet launch was slated to happen on June 2, 2018. But almost a week later the blockchain is not yet live.

For those who do not know, mainnet is an acronym for the main network of a blockchain platform. The EOS cryptocurrency was built on top of the Ethereum’s blockchain (a platform it aims to best), and the currency was to move on to its own blockchain with the mainnet launch.

EOS has received widespread criticism pretty much since its inception for loopholes in its vision and, worse, in its execution — but the mainnet launch has been a fiasco in its own right.

The whole saga began when hackers managed to gain control of Blockne’s Zendesk account and used it send phishing emails. I received one such email in my inbox, and I was almost convinced of its authenticity. No wonder, hackers could make away with millions of dollars of investors’ money.

Less than a week away from its mainnet launch, Qihoo360 — a reputed Chinese internet security firm — found several vulnerabilities in the EOS network. The bugs could allow hackers to remote control EOS nodes and attack any cryptocurrency built on top of its blockchain.

The security firm said that they notified Blockne about the vulnerabilities, and the company promised to delay the launch until all bugs were fixed.

But following the media reports, EOS denied any delay stating that the bugs have either already been fixed or are in the process of getting fixed.

For a company that just promised that all the bugs have been fixed, its next step was peculiar. EOS went ahead and announced a bug bounty program with heavy rewards for developers . Its HackerOne profile shows that bugs continue to be discovered and rewarded as recently as yesterday.

It is, of course, a good thing that bugs are found and reported. The problem here is that EOS announced the bug bounty program too late, when its security glitches already became public after the email breach and Qihoo360 reports. On top of it, EOS seems to have lied about vulnerabilities getting fixed in time for the mainnet launch.

As if their security worries were not enough, EOS came up with a poorly drafted constitution (An older draft was even worse) for its blockchain, that ended up receiving criticism from computer scientist and cryptographer Nick Szabo.

The fact that EOS even has a constitution of this manner goes against the idea of decentralization, but it is the words that do the actual damage, as twitter user Panek points out .

This is one of the clauses in the constitution , for example:

The constitution has been drafted by the Blockne team. The fact that EOS will live by their words alone, it doesn’t sound like it has no owner. Another thing worth noting in this clause is that no one is “allowed” to control more than 10 percent of the EOS cryptocurrency supply.

Coincidentally (not), that is the exact amount of the EOS tokens Blockne publicly owns. This is probably the company’s way of saying that they do not want anyone to have more control over the EOS ecosystem than they have. It is another matter entirely that how do they plan to execute this clause for a publicly traded currency that anyone can buy and store in multiple wallets.

Other clauses in the constitution call for “monitoring,” “adjudication,” “penalization,” and “arbitrations.” All of these clauses establish Blockne as a central authority governing the blockchain.

It is not just the constitution that is raising worries about centralization with EOS. Their method of deciding when they will finally launch their mainnet is similar.

“ EOS block producers (BP) candidates meet on video every day vote on whether or not the mainnet will be ready to launch the following day,” t he EOS website tracking the mainnet status states. “ The vote is cast as GO or NOT GO.”

Under the project’s consensus algorithm — delegated proof-of-stake (dPoS) — a number of block producers are chosen to act as validators, which in EOS’s case is 21. The power of these 21 delegates is not just limited to deciding when the mainnet will actually go live though.

As the minutes of meetings from the latest Zoom call of EOS block producers shows, they even have the power to “print” new EOS cryptocurrency.

A poll is conducted in the middle of the meeting: Should we “print” 19k EOS or “work out” a solution to have 1 billion flush at launch?

The majority agrees to print the EOS tokens and the decision is made.

The fact that EOS is letting a handful of people control vital decisions about the network like this has received severe criticism from cryptocurrency community on Reddit and Twitter . “This is hardly democratic, let alone decentralized,” is the consensus on social media.

In my opinion, if blockchain companies can’t launch an actual product after raising millions (or billions in case of EOS) of dollars, then enthusiasts can hardly complain when critics argue that ‘blockchain is crappy technology and a bad vision for the future.’

If you want to know in case EOS finally launches its mainnet, you can track it here .

What you need to know before choosing your first cryptocurrency wallet

Welcome to Hard Fork Basics, a collection of tips, tricks, guides, and advice to keep you up to date in the cryptocurrency and blockchain world.

This might seem like an obvious one to a seasoned cryptocurrency hodler , but if you’re new to the game – there are a few basic things you should know when it comes to storing your cryptocurrency.

Technically, you don’t actually store your cryptocurrency, but rather the private key that allows you to access, send, and spend your cryptocurrency. But without that private key, you can’t access your coins, so for the most part storing your private key is effectively storing your coins.

There are three main ways of storing your cryptocurrency: custodial wallets, software wallets, and hardware wallets. Cryptocurrency storage can be either hot or cold. Hot storage is when your coins are stored online, and – yep, you guessed it – cold storage is when your coins are kept offline.

This article will take you through what each of these is and why you might or might not want to use them to store your cryptocurrency.

Custodial wallets

This might actually sound like the most complicated of the bunch, but it’s probably one of the first cryptocurrency wallets most people actually use. If you buy your cryptocurrency through exchanges like Coinbase or Bithumb, you might say you store your cryptocurrency on your exchange account. What you’re actually doing is storing it in a custodial wallet provided by that exchange.

A custodial wallet is just a fancy way of saying that your private keys are being stored, and looked after for you by a third-party custodian. Custodial wallets are usually hot wallets.

In some cases this is good because all you have to remember is your login details to the platform, the custodian takes care of ensuring your coins are safe. Good custodians are often more diligent with security than careless individuals. That said, storing your coins in a custodial wallet doesn’t give you complete control over them. If you want to move them, you have to ask the custodian and hope that they comply with your request.

If a custodian controls a large number of wallets on behalf of its clients, it may also be a big target for attackers . It might be a quick and easy way to store your coins, but it might not be the safest.

Software wallets

Software wallets are one the most accessible forms of cryptocurrency storage available. As the name suggests, it’s simply a piece of software that runs on hardware you already own, like your laptop or smartphone. The software encrypts and protects your private keys. Like custodial wallets, software wallets are usually hot too.

Software wallets have few barriers to entry as they don’t cost anything to download, and all you have to do is set them up, generate an address, and start sending or receiving cryptocurrency. Most smartphone wallet apps have on screen guides that take you through the initial set up too, which can be very useful.

However, software wallets, particularly those on smartphones, aren’t always secure. The level of security in a smartphone-based software wallet varies depending on how the app makes use of the phone’s hardware to secure coins . You should also be aware that there are a lot of fake wallet apps that make off with your coins as soon as you put them into the app.

What’s more, as smartphones are usually always online, they are vulnerable to many more attack vectors, like phishing , than offline hardware-based storage.

Hardware wallets

Hardware wallets are one of the more secure ways of storing your cryptocurrency at the moment, as they store your cryptocurrency offline. A hardware wallet is an actual physical device responsible for protecting your cryptocurrency and private key. Most of them look like a USB flash drive, usually with a small screen, and some buttons on them.

You only ever need to connect a hardware wallet to the internet when you need to make a transaction, so if a hacker is going to try and target you over the web, they have a very small window of opportunity. However, the fact you need to keep them offline makes them a little more cumbersome than a software wallet which has all your funds – ready to go – at all times. If you’re constantly moving coins around, hardware wallets might become a headache, from a practical point-of-view.

As hardware wallets are cold storage they are quite safe from hackers, but they’re not immune. They can be infected with malware , which tricks a user into sending coins to scammers. Also, because you are buying a physical device, you have to be sure you’re buying a legitimate version; not one that’s been tampered with and might siphon your coins to someone else’s address as soon as you load your coins.

If you’re really keen about long term cryptocurrency storage, you could put all your coins on a hardware wallet and lock it away in a safe-deposit bank, almost as if it were gold bullion! But even sometimes, that isn’t totally safe .

Which should I choose?

There is no such thing as a perfect way to store cryptocurrency. If you want a fast way of moving coins around, you’ll likely have to sacrifice security, and vice-versa.

Generally speaking, it makes sense to choose a wallet type based on how you use cryptocurrency and how much of it you plan on storing in said wallet.

If you have a lot of coins, you’d be stupid not to try and pick the most secure form of storage. If you have small amounts, that you regularly trade and can realistically afford to lose – custodial or software wallets should work just fine, but make sure you get a trustworthy one.