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- Uulala developed app aimed at underbanked users
- SEC said investors were misled about technology
- Company sold unregistered digital tokens, agency claimed
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(Reuters) - A California-based fintech company with an app aimed at "under-banked" communities settled claims by the U.S. Securities and Exchange Commission that it misrepresented the technology and illegally sold unregistered digital tokens.
The SEC said in filings in Los Angeles federal court on Wednesday that Uulala Inc and founders Oscar Garcia and Matthew Loughran raised $9 million from investors between 2017 and 2019 through an unregistered initial coin offering.
Garcia, the company's chief executive, and Loughran, its former chief marketing officer, also settled claims that they misrepresented the company's technology in a white paper touting the UULA token.
The company and two men did not admit to the allegations in the settlement. Their attorneys did not immediately reply to requests for comment on Wednesday.
Uulala describes its mobile phone app as allowing users to build credit through its "proprietary micro-credit algorithm."
The company used the feature as a selling point in the ICO, even though it was still under development at the time, the SEC said.
The Ontario-based company also falsely told investors that its product used a proprietary database technology that actually belonged to another company, the agency alleged.
To settle those claims, the company agreed to disable all of the UULA tokens it owns, and ask cryptocurrency exchanges to disallow trading of the tokens it issued.
Uulala also agreed to pay the SEC a $300,000 fine, while Garcia and Loughran agreed to fines of $193,000 and $50,000, respectively.
The settlement comes a day after SEC chair Gary Gensler called on Congress to give the agency more authority to better police cryptocurrency trading, lending and platforms, which he called a "Wild West" riddled with fraud and investor risk.
The case is SEC v. Uulala Inc, U.S. District Court, Central District Of California, No. 21-cv-01307.
For the SEC: Daniel Blau and Jasmine Starr
For Loughran: Stanley Morris of Corrigan & Morris
For Uulala and Garcia: David Kaminski of Carlson & Messer