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ICO

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On February 19, 2020, the U.S. Securities and Exchange Commission announced that it had settled charges against blockchain technology startup Enigma MPC for conducting an unregistered offering of securities in the form of an initial coin offering (ICO). Enigma, based in San Francisco and Israel, has agreed to return funds to harmed investors and to other relief. According to the SEC’s order, Enigma raised approximately $45 million from sales of its digital assets (called ENG…

Hester Peirce, who is a Commissioner of the U.S. Securities and Exchange Commission (SEC) and affectionately referred to as Crypto Mom, formally proposed, during a speech on February 6, a safe harbor from certain U.S. securities laws aimed at cryptotoken network developers. The proposed safe harbor would provide network developers with a three-year exemption from certain aspects of U.S. securities laws with respect to token transactions so long as certain conditions are met. Ms. Peirce…

On December 18, 2019, the U.S. Securities and Exchange Commission announced that it had settled charges against blockchain technology company Blockchain of Things Inc. (BCOT) for conducting an unregistered initial coin offering of digital tokens. According to the SEC’s Order, BCOT raised nearly $13 million to develop and implement its business plans, including developing its blockchain-based technology and platform.  As noted in the SEC’s Order, BCOT explained that its platform was intended to allow third-party…

On October 11, 2019 the U.S. Securities and Exchange Commission announced that it has filed an emergency action and obtained temporary restraining order against two offshore entities conducting an alleged unregistered, ongoing digital token offering in the U.S. and overseas that has raised more than $1.7 billion of investor funds. According to the SEC’s complaint, Telegram Group Inc. and its wholly-owned subsidiary TON Issuer Inc. began raising capital in January 2018 to finance the companies’…

On August 12, 2019, the U.S. Securities and Exchange Commission announced settled charges against a New England-based blockchain company for offering and selling approximately $6.3 million of securities to the public in unregistered transactions. According to the SEC’s order, in late 2017, SimplyVital Health, Inc. publicly announced its plan to conduct an ICO to raise money to further its development of Health Nexus, a “healthcare-related blockchain ecosystem.” SimplyVital offered a new token called Health Cash,…

On August 13, 2019, the U.S. Securities and Exchange Commission announced on fraud charges against a Brooklyn individual and two entities under his control who allegedly engaged in a fraudulent scheme to sell digital securities to investors and to manipulate the market for those securities. The SEC filed charges against Reginald “Reggie” Middleton, a self-described “financial guru,” and two entities he controls, Veritaseum, Inc. and Veritaseum, LLC (collectively, Veritaseum).  The complaint, alleges that the Defendants…

Background The Australian Securities and Investments Commission (ASIC) has released an update to Information Sheet 225 Initial coin offerings and crypto-assets (INFO 225). These updates follow the Australian Treasury’s release of its issues paper in January this year, and a subsequent consultation period with stakeholders. Baker McKenzie was involved in the consultation process and delivered a written submission addressing token categorisation, secondary trading in the ICO market, and the current Australian regulatory framework pertaining to…

We previously reported that, in November 2018, in a first of its kind case, the SEC charged  celebrities DJ Khaled and Floyd Mayweather with touting violations involving ICOs. Without admitting or denying the findings, Mayweather and Khaled agreed to pay disgorgement, penalties and interest.  One of the ICOs that they touted was Centra Tech.  They were also sued for securities law violations in a civil case brought by Centra Tech investors. The case was based on…

On February 20, 2019 the U.S. Securities and Exchange Commission (“SEC”) reached a settlement with Gladius Network LLC for conducting an unregistered initial coin offering (“ICO”), which the company self-reported to the SEC. In July 2017, Gladius’s founders began developing a network in which participants could rent spare bandwidth and storage space on their computers and servers to others for use in defense against certain types of cyberattacks and to enhance their content delivery speed.…

In November 2018, a U.S. District Court declined to accept the SEC’s argument that an ICO token was a “security.”  There are those who saw this as a setback for the SEC, although, as we wrote on this blog, that was an error because the judge merely held that he needed more evidence to resolve disputed questions of fact.  In the face of a request by the SEC for reconsideration, the judge has now reversed…