ICO issuer Black Cell Technology Limited (Black Cell) has halted its initial coin offering (ICO) to the Hong Kong public and agreed to unwind ICO transactions for Hong Kong investors by returning them the relevant tokens following regulatory action by the Securities and Futures Commission (SFC) over concerns that Black Cell had engaged in potential unauthorized promotional activities and unlicensed regulated activities.

In addressing SFC’s regulatory concerns, Black Cell has also undertaken not to devise, set up or market any scheme that constitutes a Collective Investment Scheme (CIS) unless in compliance with the relevant requirements under the Securities and Futures Ordinance (SFO) (Note 1).

The SFC found that Black Cell had promoted an ICO to sell digital tokens to investors through its website accessible by the Hong Kong public, with the pitch that the ICO proceeds would be used to fund the development of a mobile application and holders of the tokens would be eligible to redeem equity shares of Black Cell (Note 2).

The SFC considers such arrangement may constitute a CIS under the circumstances.

Where an ICO involves an offer to the Hong Kong public to acquire an interest or participate in a CIS, prior authorization or licensing requirements under the SFO may be triggered unless an exemption applies.  An interest in a CIS is regarded as “securities” as defined in the SFO (Notes 3 & 4).

Parties engaging in ICO activities are reminded to seek legal or other professional advice if they are in doubt about the applicable legal and regulatory requirements.  Investors are again reminded to exercise caution before participating in ICO (Note 5).



  1. Black Cell promoted the digital tokens called KROPS, through the website www.mykrops.com.
  2. CIS has four relevant elements: (a) it must involve an arrangement in respect of property; (b) participants do not have day-to-day control over the management of the property even if they have the right to be consulted or to give directions about the management of the property; (c) the property is managed as a whole by or on behalf of the person operating the arrangements, and/or the contributions of the participants and the profits or income from which payments are made to them are pooled; and (d) the purpose of the arrangement is for participants to participate in or receive profits, income or other returns from the acquisition or management of the property.  See Schedule 1 to the SFO.
  3. Under section 103 of the SFO, it is an offence for a person to issue, or to have in his possession for the purposes of issue, whether in Hong Kong or elsewhere, an advertisement, invitation or document which is to his knowledge is or contains an invitation to the public to, among other things, acquire an interest in or participate in, or offer to acquire an interest in a CIS, unless the issue is authorized by the SFC or an exemption applies.
  4. Under section 114 of the SFO, it is an offence for a person to carry on a business in a regulated activity or hold himself out as carrying such a business in a regulated activity unless the person is licensed or authorized by the SFC.
  5. Please see the SFC’s press release dated 9 February 2018.