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Securities

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Crypto exchange startup INX Limited filed a preliminary prospectus outlining its plans to raise between $5 million and $129.5 million in an initial public offering (IPO), making it one of few cryptocurrency companies to seek a U.S. listing for its tokens through registration of a public offering.  INX filed a prospectus with the U.S. Securities and Exchange Commission (SEC) in August in anticipation of an offering of approximately 130 million INX security tokens. Leveraging guidance…

Cryptoassets continue to be a hot topic for financial services regulators. On 19 October 2018, it was the turn of the Securities and Markets Stakeholders Group (“SMSG“), which represents various stakeholders’ interests to the European Securities Markets Authority (“ESMA“). The SMSG published a report setting out its advice to ESMA on how to contain the risks of cryptoassets and ICOs.

On Tuesday, September 11, the Financial Industry Regulatory Authority (“FINRA”) took its first disciplinary action against an industry professional, charging a broker, Timothy Tilton Ayre, with securities fraud and the unlawful distribution of an unregistered cryptocurrency security, HempCoin. FINRA’s complaint alleges that Ayre attempted to lure public investment in his public company, Rocky Mountain Ayre, Inc., by issuing and selling HempCoin.  Ayre made a host of fraudulent statements about his company’s business and finances, as…

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 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…

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,…

The U.S. Securities and Exchange Commission announced today that it charged two co-founders of a purported financial services start-up with orchestrating a fraudulent initial coin offering (ICO) that raised more than $32 million from thousands of investors last year. Criminal authorities separately charged and arrested both defendants. The SEC’s complaint alleges that Sohrab “Sam” Sharma and Robert Farkas, co-founders of Centra Tech., Inc., masterminded a fraudulent ICO in which Centra offered and sold unregistered investments…

The office of Massachusetts Secretary of State announced today that it had halted ICOs from five companies, claiming that the sale of digital tokens amounts to the unregistered offering of securities.  Mattervest Inc, Pink Ribbon ICO, Across Platforms Inc, Sparkco Inc and 18 Moons were all ordered to  stop sales of their coins.  The firms, which were all either incorporated in Massachusetts or named the state as their principal place of business, were offering and…

We have reported in this space about how the SEC has indicated that most ICOs probably qualify as securities under U.S. law. see 1-3 and 1-23.  One of the SEC’s first enforcement actions in this regard was against  Maksim Zaslavskiy for his two initial coin offerings allegedly marketed through his companies REcoin and Diamond Reserve Club.   That was followed by a criminal suit. Yesterday, Zaslavskiy sought to dismiss the criminal case, arguing that the cryptocurrencies…