Last Friday, November 16, the U.S. Securities and Exchange Commission Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets issued a “Statement on Digital Asset Securities Issuance and Trading.” The purpose was to note that, while the SEC encourages technological innovation, market participants must still adhere to the Commission’s well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated…
On November 8, the SEC settled charges against Zachary Coburn, the founder of EtherDelta, a digital token trading platform. This is the SEC’s first enforcement action against an entity for operating as an unregulated national securities exchange. Mr. Coburn consented to the SEC’s order and agreed to pay $300,000 in disgorgement, $13,000 in prejudgment interest, and a $75,000 penalty. In its order, the SEC concluded that EtherDelta’s trading system met the definition of “exchange” under…
Last week we reported that the US SEC stopped a fraudulent ICO that falsely claimed that it had SEC approval. Yesterday, the SEC suspended trading in the securities of a company amid questions surrounding its statements about partnering with a claimed SEC-qualified custodian for use with cryptocurrency transactions and a purportedly registered public offering of preferred stock. The SEC’s trading suspension order says that two August 2018 press releases issued by Nevada-based American Retail Group,…
The U.S. SEC announced yesterday that it had stopped what sounds like the most brazen fake ICO yet. According to the complaint, Blockvest LLC not only falsely claimed that it had obtained SEC approval, it also used the SEC seal without permission (a violation of federal law) and promoted the ICO with a fake agency called the “Blockchain Exchange Commission” (using a graphic similar to the SEC’s seal and the same address as SEC headquarters).…
On September 27, the US Securities and Exchange Commission (SEC) filed charges against an international securities dealer and its Austria-based CEO for allegedly violating the federal securities laws in connection with security-based swaps funded with Bitcoins. According to the SEC’s Complaint, 1pool Ltd. a/k/a 1Broker, registered in the Republic of the Marshall Islands, and its CEO Patrick Brunner, solicited investors from the United States and around the world to buy and sell security-based swaps. Investors…
Last week we reported that FINRA brought its first-ever disciplinary action in the cryptocurrency space. But there were also two other first-of-their-kind enforcement actions last week by the U.S. SEC. On September 11, the SEC announced its first-ever enforcement action finding an investment company registration violation by a hedge fund manager based on its investments in digital assets. The SEC entered an Order finding that Crypto Asset Management LP (“CAM”) offered a fund that operated…
On August 22, the Securities and Exchange Commission (“SEC”) issued three separate orders rejecting multiple applications which would have allowed the listing and trading of Bitcoin exchange-traded funds (“ETFs”). Two of the orders involved NYSE Arca, Inc., an exchange headquartered in Chicago. NYSE Arca submitted proposed rule changes which would allow it to list shares on behalf of two Proshares ETFs and five Direxion ETFs. The third order involved a proposed rule change by the…
Unikrn is an esports gambling startup associated with that raised approximately $31 million through an initial coin offering (“ICO”) in October 2017. Mark Cuban was one of the notable investors in Unikrn. The company’s token, UnikoinGold, was marketed as a method of currency to be used on the Unikrn gambling platform, which allows users to bet on esports. At one point in early January UnikoinGold was worth as much as $2.47, though the tokens are…
On August 14, the U.S. Securities and Exchange Commission (the “SEC”) recently obtained permanent officer-and-director and penny stock bars against the founder of a company who perpetrated a fraudulent ICO to fund oil exploration and drilling in California. According to the SEC’s order, David T. Laurance and Tomahawk Exploration LLC attempted to raise money through the sale of blockchain-based digital tokens called “Tomahawkcoins.” The SEC’s order finds that the defendants’ promotional materials used inflated projections…
Last year, the SEC rejected an application by Cameron and Tyler Winklevoss for what would have been the first-ever Bitcoin ETF. The group made some changes and resubmitted their application in June. In a release yesterday, the SEC rejected the revised request as well. The exchange that sought to list the Winklevoss’s ETF had argued that Bitcoin trading is too decentralized across the globe for fraudsters to manipulate the price. The SEC found that the…