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SEC

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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…

On December 17 we published an article in Law360 describing the SEC’s busy November in which it secured three “firsts” in its crackdown on unlawful digital activity: (1) its first enforcement action against an entity for operating as an unregulated national securities exchange; (2) its first cases imposing civil penalties solely for ICO securities offering registration violations; and (3) its first cases charging touting violations involving ICOs.  By highlighting its own “firsts,” the SEC was…

The U.S. SEC has shown it seriousness in cracking down on noncompliant ICOs by pursuing enforcement in a number of different ways.  We have reported on the SEC’s recent first-time enforcement action against an entity for operating as an unregulated national securities exchange and its recent first cases imposing civil penalties solely for ICO securities offering registration violations.  Yesterday marked another new first.  The cases brought against celebrities  DJ Khaled and Floyd Mayweather were the first…

On November 27, 2018, the U.S. District Court for the Southern District of California issued a decision that is already being reported as one holding that a token is not a “security.”  That is incorrect.  The court left for another day the issue of whether the token in question meets the securities law definition of a “security.”  It merely held that, for purposes of the request for a preliminary injunction, the court could not conclude that…

On Friday, November 16, the U.S. Securities and Exchange Commission announced that it had settled charges against two companies that sold digital tokens in ICOs.  Munchee, Inc. was the Commission’s first non-fraud ICO registration case and the Commission did not impose a penalty or include undertakings from Munchee, which stopped its offering before delivering any tokens and promptly returned proceeds to investors.  Friday’s cases are the first cases imposing civil penalties solely for ICO securities…

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…