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April 2018

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The U.S. SEC’s continued effort to try to walk a tightrope regarding regulation of ICO’s was on display again yesterday.  Chairman Clayton has famously said that “I have yet to see an ICO that doesn’t have a sufficient number of hallmarks of a security.”  Yet, during testimony yesterday,  William Hinman, the director of the SEC’s Division of Corporation Finance, stated his division is “striving for a balanced approach,” and repeated the oft-voice concern that they…

Unless you’ve been living under a series of highly distributed rocks, you’ll be aware that blockchain (or at least the group of technologies known as Distributed Ledger Technologies or DLTs) is causing a huge stir in the tech world.  Almost daily, we see the launch of potentially game-changing new cryptocurrencies or announcement from major corporations of significant new DLT trials or implementations. However, another major force shaping the digital world is the ever-strengthening focus on…

The U.S. Commodity Futures Trading Commission (CFTC) announced the filing of a Complaint in the U.S. District Court for the Eastern District of New York charging Defendants Blake Harrison Kantor, who frequently uses the alias Bill Gordon, and Nathan Mullins, and the entities Blue Bit Banc, Blue Bit Analytics, Ltd. with operating a  fraudulent scheme involving binary options and a virtual currency known as ATM Coin.  The district court, on April 17, 2018, entered a…

Today, New York’s Attorney General launched the Virtual Markets Integrity Initiative, a fact-finding inquiry into the policies and practices of platforms used by consumers to trade cryptocurrencies.  The Attorney General’s office sent letters to thirteen major virtual currency trading platforms requesting key information on their operations, internal controls, and safeguards to protect customer assets. The letters were sent to: (1) Coinbase, Inc. (GDAX); (2) Gemini Trust Company; (3) bitFlyer USA, Inc.; (4) iFinex Inc. (Bitfinex);…

In a speech on new technologies on Friday, Hong Kong Securities and Futures Commission (SFC) deputy chief Julia Leung reiterated previous concerns of risks associated with ICOs.  She acknowledged that innovative technologies such as blockchain have the potential to improve efficiency and financial inclusion, but warned “that does not entitle anyone to conduct fundraising from the public in violation of securities law.”  More frankly, she noted that ICOs: [A]re dubious, if not downright frauds.  The…

To date, the Financial Conduct Authority (FCA), the UK financial services regulator has made clear (via its Feedback statement on DLT) that cryptocurrencies are not currently regulated, provided they are not part of any other regulated products or services. Nonetheless it has published a series of consumer warnings  – on ICOs and the risks of investing in cryptocurrency CFDs. On April 6, 2018 the FCA issued a further statement warning that, in its view, cryptocurrency…

The Texas State Securities Board issued a report summarizing its a four-week investigation of securities offerings tied to virtual currencies.  They opened 32 investigations in the period commencing December 18, 2017.  Among the findings: No promoters were registered to sell securities in Texas, a violation of the Texas Securities Act; 30 promoters were broadly using websites, social media, and onlineadvertising to market to Texans; Seven promoters were offering securities tied to a new cryptocurrency; At…

Last Thursday, India’s central bank, the Reserve Bank of India, issued a statement providing that the banks and financial institutions it oversees would no longer be allowed to work with cryptocurrency exchanges and other related services. The Statement says: Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with…

The U.S. Securities and Exchange Commission obtained a court order freezing more than $27 million in trading proceeds from allegedly illegal distributions and sales of restricted shares of Longfin Corp. stock involving the company, its CEO, and three other affiliated individuals. According to a complaint unsealed last Friday in federal court in Manhattan, shortly after Longfin began trading on NASDAQ and announced the acquisition of a purported cryptocurrency business, its stock price rose dramatically and…

A class action lawsuit was brought today on behalf of investors in Nano f/k/a RaiBlocks (XRB), alleging, according to the plaintiffs’ lawyers, that Nano and key members of its core team violated federal securities laws and that, in their push to introduce XRB to a wide market of investors, recklessly directed investors to open accounts and place their assets with a little known, and severely troubled, Italian cryptocurrency exchange called BitGrail.  On February 9, 2018,…