UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933

Release No. 11215 / July 21, 2023

ADMINISTRATIVE PROCEEDING

File No. 3-21535

In the Matter of

QUANTSTAMP, INC.

Respondent.

ORDER INSTITUTING CEASE-ANDDESIST PROCEEDINGS PURSUANT TO 

SECTION 8A OF THE SECURITIES ACT 

OF 1933, MAKING FINDINGS, AND 

IMPOSING A CEASE-AND-DESIST 

ORDER 

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate that ceaseand-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 

of 1933 (“Securities Act”), against Quantstamp, Inc. (“Quantstamp” or “Respondent”). 

II.

In anticipation of the institution of these proceedings, Respondent hassubmitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the

findings herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 

Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act, Making Findings, 

and Imposing a Cease-and-Desist Order (“Order”), as set forthbelow.
2

III. \

On the basis of this Order and Respondent’s Offer, the Commission1finds that: 

Summary

1. From October to November 2017, Quantstamp offered and sold crypto asset 

securities to fund the development of an automated smart contract security auditing protocol. 

Quantstamp broadly marketed the sale of its crypto asset security, named QSP, including in the 

United States. Quantstamp raised approximately $28.35 million in ether and USD through the sale 

of QSP to more than 5,000 investors.

2. Based on the facts and circumstances set forth below, Quantstamp violated Sections 

5(a) and 5(c) of the Securities Act by offering and selling the QSP tokens as investment contracts, 

and therefore securities, without having a registration statement filed or in effect with the 

Commission or qualifying for an exemption from registration.

Respondent

3. Quantstamp is a Delaware company that was incorporated on October 26, 2017 and 

is headquartered in San Francisco, California. Quantstamp is not registered with the Commission 

in any capacity.

Facts

Quantstamp Broadly Marketed the Sale of QSP to Fund Its Efforts to Develop an Automated 

Smart Contract Security Auditing Protocol 

4. In August 2017, Quantstamp released a “White Paper” with respect to its upcoming 

offering of a crypto asset called QSP, which described Quantstamp’s plans to develop a protocol 

on the Ethereum blockchain that would provide automated security audits of smart contracts (the 

“Protocol”). Smart contracts are the self-executing coded contracts on which blockchain 

technology relies. In the White Paper, which Quantstamp updated during the course of the QSP 

offering, Quantstamp explained its plans for the yet-to-be-developed Protocol, including that smart 

contract creators could eventually receive security audits through the Protocol in exchange for

crypto assets Quantstamp would mint as ERC-20 tokens on the Ethereum blockchain, called QSP.

The QSP, in turn, would be paid out from the Protocol to “validators” (who would run the Protocol 

node software on their computers), “contributors” (who would help write code for the Protocol),

and “bug finders” (who would identify vulnerabilities). The White Paper also described 

Quantstamp’s plans to implement a governance system “after the core features [of the Protocol] are 

implemented” by which users could vote on changes to the Protocol over time. The Protocol was 

undeveloped and the QSP tokens had no use at the time of the offering.

1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other 

person or entity in this or any other proceeding.
3

5. Quantstamp also began marketing the project and its upcoming sale of QSP 

tokens—which Quantstamp publicly explained would fund the development of the Protocol—on 

Quantstamp’s website, quantstamp.com, as well as online in press releases, blogs, and social media 

pages such as Twitter, Facebook, YouTube, Medium, and Telegram, all of which were available to 

U.S. persons. Quantstamp, through its representatives, also appeared at several blockchain industry 

events in 2017, many of which took place in California, including a symposium in San Francisco 

in September 2017, a conference in Berkeley in early October 2017, a convention in Santa Monica 

in mid-October 2017, and an expo in Santa Clara in late November 2017.

QSP Purchasers Reasonably Expected to Profit from Quantstamp’s Efforts 

6. In public statements, Quantstamp emphasized the large market potential for the 

smart contract security auditing product it planned to develop, and led QSP purchasers to expect 

that the value of their tokens would increase with the success of Quantstamp’s enterprise. In the 

White Paper, Quantstamp explained: “security audit processes that rely on human experts cannot 

keep up with the exploding growth rate of smart contract adoption. Between June 2017 and 

October 2017, the number of smart contracts grew from 500K to 2M. Within a year, we expect 

there to be 10M smart contracts. This will create an exponential increase in the demand for 

auditing.” Quantstamp indicated that the Protocol it planned to develop would be lucrative because 

“the potential costs of smart contract failures will also grow.” For example, in one press release, 

Quantstamp claimed that the Company’s technology “would have saved over $100 million in 

smart contract losses in the Ethereum ecosystem” in the preceding year. Quantstamp’s social 

media pages also linked to optimistic third-party assessments of the profit potential of Quantstamp 

and its QSP tokens.

7. Quantstamp represented that the Protocol it planned to deliver was likely to be 

highly competitive in the expanding market. In the White Paper, Quantstamp stated “we expect 

every Ethereum smart contract to use the Quantstamp protocol to perform a security audit[.]” In at 

least one press release issued during the offering, Quantstamp encouraged “that the blockchain 

community become stakeholders in our business.”

8. Quantstamp also touted the credentials of and plans for its team, which included the 

founders, executives, employees, and advisors of the company. Quantstamp highlighted that the 

team included “four multidisciplinary PhDs and well-respected leaders in the cryptospace.” The 

White Paper noted that the team represented “years of combined research and experience in the 

discipline of software verification.” The White Paper featured a “Technology Roadmap” that 

summarized the key milestones Quantstamp had already achieved and those it planned to meet in 

the coming year. The anticipated milestones included, among other things, “build the Quantstamp 

validation node,” “add analysis software,” and “deploy to test network.”

9. On its website, Quantstamp stated that there would be a fixed supply of QSP. 

Specifically, the Company would mint 1 billion QSP in total, 65% of which would be sold, 20% 

allocated to the team, 10% reserved for core activities, and 5% to “community development.”

Quantstamp noted that unsold tokens would be “burned.” 
4

10. Quantstamp provided a chart on its website reflecting that it would use 50% of the 

token sale proceeds for product development, 30% for marketing and community, 15% for 

administrative and general expenses, and 5% for security. The “Financial Planning” section of the 

White Paper stated that the number of engineers and staff members Quantstamp would hire, as 

well as the milestones for its product, marketing, and business plans, would depend on the amount 

of funds raised through the offering.

11. Quantstamp priced the QSP at approximately $.05 per token during the offering but

provided discounts of up to 50% to purchasers who agreed to provide “proof of caring” 

submissions, such as publishing articles and videos explaining Quantstamp’s business, translating 

materials, and providing advice and expertise to improve Quantstamp’s product. Quantstamp also 

advertised that QSP tokens could be earned in exchange for promotional activities such as 

following the company’s Twitter page and joining its channel on a chat application. 

Quantstamp Raised Funds from the General Public Through the Sale of QSP

12. From October to November 2017, Quantstamp raised a total of approximately 

87,000 ether, equivalent to approximately $28.35 million at the time of the sales, from the sale of 

QSP to over 5,000 persons (the “Offering”). Of this, Quantstamp raised $1.14 million from sales 

pursuant to “Simple Agreements for Future Tokens” (“SAFTs”), which Quantstamp generally used 

for U.S. investors. For investors that purchased QSP through entry into SAFTs, Quantstamp did 

not take reasonable steps to verify their accredited status at the time of the sales, although it later 

sought to do so. The remaining amount was raised pursuant to Token Purchase Agreements, which 

Quantstamp generally used for non-U.S. investors, though Quantstamp’s own records reflect that 

dozens of U.S. investors were able to purchase through Token Purchase Agreements. Quantstamp 

sold the QSP tokens to U.S. and non-U.S. investors as part of the same offering and agreed to

provide the same QSP tokens to all purchasers. Both the SAFT and Token Purchase Agreement 

specified that the transactions were being made for investment purposes.

13. On December 1, 2017, Quantstamp filed a Form D in which it claimed that the 

unregistered sales of QSP were exempt under Rule 506(c) of Regulation D, for an unlimited 

number of accredited investors in a general solicitation, and pursuant to Regulation S, for foreign 

investors. Quantstamp, however, failed to comply with Rule 506(c)(2)(ii) of Regulation D, and 

also made directed selling efforts into the United States and sold QSP in non-offshore transactions.

14. Quantstamp distributed the QSP tokens on the Ethereum blockchain beginning on 

November 17, 2017. It retained approximately 35% of the outstanding token supply for itself.

15. The QSP smart contract did not contain any restrictions on transferability following 

the initial sale and distribution. Although the SAFT and Token Purchase Agreement included 

provisions requiring purchasers to confirm that the QSP would be acquired for their own account 

and not with a view to resale or distribution, Quantstamp actively sought to make QSP available on 

crypto asset trading platforms. It also transferred several thousand QSP to some platforms in late 

November 2017, just before QSP trading on those platforms went live, for the purpose of “market 

making” to provide liquidity to customers. In its communications with the platforms, Quantstamp 

never requested any restrictions to be placed on U.S. purchasers. 
5

Quantstamp’s Activities After the Offering

16. Quantstamp publicly released the first version of the Protocol in March 2018, six 

months after the Offering. It released an upgrade in September 2018, and a final version in June 

2019, approximately eighteen months after the Offering. In total, Quantstamp used over $26 

million of the Offering proceeds for the development of the Protocol. After the June 2019 final 

release, Quantstamp ceased further development of the Protocol, and no longer operates nor lends 

substantial support to the Protocol. QSP token holders have no voting rights or other means of 

control over the Protocol.

17. Quantstamp holds a large block of QSP tokens, and agrees pursuant to the 

undertaking in paragraph 26.A below to transfer all QSP in its possession or control to the Fund 

Administrator (to be appointed pursuant to section IV.E, infra) to be destroyed or permanently 

disabled. 

18. Starting in early 2018, soon after the token sale and while it was developing the 

Protocol, Quantstamp began a separate business performing manual smart contract security audits 

using third-party software in exchange for consulting fees (the “Consulting Business”). This 

Consulting Business received separate venture funding and is Quantstamp’s primary business line 

today. QSP is not currently accepted by Quantstamp as payment for audit services done by its 

Consulting Business and has not been accepted by the Consulting Business since at least 2018. 

QSP tokens do not entitle the holder to any share of revenue or other rights related to the 

Quantstamp Consulting Business.

Legal Analysis

Quantstamp Violated the Offering Registration Provisions of the Securities Act In the Offer 

and Sale of QSP

19. Based on the facts and circumstances set forth above, Quantstamp offered and 

sold the QSP tokens as investment contracts, and therefore securities, pursuant to SEC v. W.J. 

Howey Co., 328 U.S. 293 (1946), and its progeny, including the cases discussed by the 

Commission in its Report of Investigation Pursuant To Section 21(a) of the Securities Exchange 

Act of 1934: The DAO (Exchange Act Rel. No. 81207) (July 25, 2017). 

20. Section 5(a) of the Securities Act states that “[u]nless a registration statement is in 

effect as to a security, it shall be unlawful for any person, directly or indirectly, (1) to make use 

of any means or instruments of transportation or communication in interstate commerce or of the 

mails to sell such a security through the use or medium of any prospectus or otherwise, or (2) to 

carry or cause to be carried through the mails or in interstate commerce, by any means or 

instruments of transportation, any such security for the purpose of sale or for delivery after sale.”

21. Section 5(c) of the Securities Act, which states that “[i]t shall be unlawful for any 

person, directly or indirectly, to make use of any means or instruments of transportation or 

communication in interstate commerce or of the mails to offer to sell or offer to buy through the 

use or medium of any prospectus or otherwise any security, unless a registration statement has 

been filed as to such security.”
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22. No registration statement was in effect for Quantstamp’s offers and sales of QSP,

nor were any exemptions from registration available. 

23. As a result of the conduct described above, Quantstamp violated Sections 5(a) and 

5(c) of the Securities Act.

Disgorgement and Civil Penalties

24. The disgorgement and prejudgment interest ordered in Section IV.C is consistent 

with equitable principles and does not exceed Respondent’s net profits from its violations, and 

will be distributed to harmed investors to the extent feasible. The Commission will hold funds 

paid pursuant to Section IV.C in an account at the United States Treasury pending distribution. 

Upon approval of the distribution final accounting by the Commission, any amounts remaining 

that are infeasible to return to investors, and any amounts returned to the Commission in the 

future that are infeasible to return to investors, may be transferred to the general fund of the U.S. 

Treasury, subject to Section 21F(g)(3) of the Exchange Act. 

Undertakings

25. Respondent has undertaken to:

A. Transfer all QSP in its possession or control to the Fund Administrator within 30 

days of receiving notice of the Fund Administrator’s appointment, to enable the Fund 

Administrator to destroy or permanently disable such QSP.

B. Publish notice of the Order on Quantstamp’s website and social media channels, in 

a form not unacceptable to Commission staff, within 10 days of the date of this Order.

C. Take reasonable steps to convey this Order to all crypto asset trading platforms that 

make QSP available for trading within 10 days of the date of this Order. 

D. Certify, in writing, compliance with the undertaking(s) set forth above. The 

certification shall identify the undertaking(s), provide written evidence of compliance in the form 

of a narrative, and be supported by exhibits sufficient to demonstrate compliance. The 

Commission staff may make reasonable requests for further evidence of compliance, and 

Respondent agrees to provide such evidence. The certification and supporting material shall be 

submitted to David Hirsch, Chief, Crypto Assets and Cyber Unit, Division of Enforcement, with 

a copy to the Office of Chief Counsel of the Enforcement Division, no later than thirty (30) days 

from the date of the completion of the undertakings. 
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IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in Respondent’s Offer. 

Accordingly, it is hereby ORDERED that pursuant to Section 8A of the Securities Act: 

A. Respondent cease and desist from committing or causing any violations and any 

future violations of Sections 5(a) and 5(c) of the Securities Act.

B. Respondent shall comply with the undertakings enumerated in Paragraph 25 above.

C. Respondent shall, within 14 days of the entry of this Order, pay disgorgement of 

$1,979,201, prejudgment interest of $494,314, and a civil money penalty of $1,000,000 (for a total 

payment of $3,473,515) to the Securities and Exchange Commission. If timely payment of 

disgorgement and prejudgment interest is not made, additional interest shall accrue pursuant to 

SEC Rule of Practice 600, and if timely payment of the civil money penalty is not made, additional 

interest shall accrue pursuant to 31 U.S.C. § 3717.

Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying 

Quantstamp as a Respondent in these proceedings, and the file number of these proceedings; a 

copy of the cover letter and check or money order must be sent to David Hirsch, Chief, Crypto 

Assets and Cyber Unit, Division of Enforcement, Securities and Exchange Commission, 100 F St., 

NE, Washington, DC 20549. 
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D. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is 

created for the disgorgement, prejudgment interest, and penalties referenced in paragraph C above. 

Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated as 

penalties paid to the government for all purposes, including all tax purposes. To preserve the 

deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall 

not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 

this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 

Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 

Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 

Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private

damages action brought against any Respondent by or on behalf of one or more investors based on 

substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding.

By the Commission. 

Vanessa A. Countryman 

Secretary