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ICO

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On June 25 U.S. federal Chief Magistrate Judge Andrea Simonton issued a Report and Recommendation concluding that Centra Tokens, issued by tech startup Centra Tech, were investment contracts and therefore securities.  There are reports in the press that this is the first time a US court has found that the issuance and sale of tokens through an ICO must comply with federal securities laws. The case in question, Rensel v. Centra Tech, Inc., is a…

Lithuania becomes the latest jurisdiction to release guidance in relation to ICOs. On 8 June 2018, the Lithuanian Government released new Guidelines to deal with what it referred to as an “explosion of ICOs” in the country.  Lithuania heralds itself as a leader in FinTech and has published the ICO Guidelines as a step towards more “certainty and transparency in the regulatory, taxation [and] accounting” requirements of ICOs, and also, importantly, to encourage the crypto…

On 11 June, the UK’s financial services regulator, the Financial Conduct Authority (FCA), published a “Dear CEO letter” providing guidance on how banks should handle the financial crime risks associated with cryptoassets. The FCA is concerned that cryptoassets are being used in criminal activities such as money laundering or terrorist financing. The regulator expects banks to take reasonable and proportionate measures to lessen the risk of facilitating such crimes. The FCA notes that where banks…

On June 6, U.S. SEC Chairman Jay Clayton was interviewed on CNBC about Bitcoin and cryptocurrencies.  He said, in effect, that “cryptocurrencies, these are replacements for sovereign currencies, replace the dollar, the euro, the yen with bitcoin… that type of currency is not a security.” As a securities lawyer and SEC defense counsel, I thought this was an absolutely correct statement of law, and refreshing candor from the SEC Chairman.  What has concerned me over…

On June 4, 2018, the U.S. SEC named Valerie A. Szczepanik as its first ever Crypto Czar.  According to the press release, in this newly created advisory position, Ms. Szczepanik will coordinate efforts across all SEC Divisions and Offices regarding the application of U.S. securities laws to emerging digital asset technologies and innovations, including ICOs and cryptocurrencies.

In an earlier post, we reported on the North American Securities Administrators Association (NASAA)’s Operation Cryptosweep, coordinated series of enforcement actions by state regulators to crack down on fraudulent cryptocurrency-related investment schemes.  Under that operation, the Vermont Department of Financial Regulation issued, on June 4, a cease and desist order to LevelNet, of Irving, California, for violations related to the Vermont Uniform Securities Act. According to the department, LevelNet is conducting an ICO seeking to…

On May 29 the Securities and Exchange Commission (“SEC”) announced it had obtained a court order halting the ICO of BAR, a coin developed by Michael Stollery, commonly known as Michael Stollaire, and his firm Titanium Blockchain Infrastructure Services.  The SEC also obtained an order approving an emergency asset freeze and the appointment of a receiver for Titanium Blockchain. In its complaint, the SEC alleged that Stollaire lied about business relationships with the Federal Reserve…

In a press release issued on May 21, The North American Securities Administrators Association (NASAA)t announced one of the largest coordinated series of enforcement actions by state and provincial securities regulators in the United States and Canada to crack down on fraudulent ICOs, cryptocurrency-related investment products, and those behind them. NASAA members from more than 40 jurisdictions throughout North America participated in “Operation Cryptosweep,” which to date has resulted in nearly 70 inquiries and investigations…

As a way of educating the public, the SEC launched a website that offers a mock ICO.  It did so in the hopes of showing how easily people can be scammed.  Howey Coins (named, tongue-in-cheek for the Howey test used by the Supreme Court to determine whether an investment is a security) claimed to have a two-month return of over 72%, as well as celebrity testimonials.  Those who clicked on “Buy Coins Now” link were…

SEC-watchers regularly quote Chairman Clayton’s statement at a February 2018 Senate hearing (“I believe every ICO I’ve seen is a security”) as evidence of the SEC’s strict view of ICOs.  During a speech yesterday at the Medici Conference, SEC Commissioner Hester Pierce took a different tact.  Asking, rhetorically, whether ICOs offerings are securities that have to be registered or qualify for an exemption, she said that the answer should be rooted in the well-know Howey…