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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 Friday, August 3, Ohio became the latest U.S. state to formally recognize blockchain technology.  Ohio’s Uniform Electronic Transactions Act states that “a record or contract that is secured through blockchain technology is considered to be in an electronic form and to be an electronic record.”  It also provides that, “[a] signature that is secured through blockchain technology is considered to be in an electronic form and to be an electronic signature.”  While these two provisions…

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…

On July 2, the U.S. Securities and Exchange Commission charged two men with the illegal sale of securities related to UBI Blockchain Internet, Ltd. (“UBIB”).  The SEC alleges that T.J. Jesky and Mark F. DeStefano made approximately USD 1.4 million by selling shares in UBIB over a 10-day period in December 2017 and January 2018.  The sales stopped when the SEC temporarily suspended trading in UBIB stock earlier this year due to concerns about the…

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…

In our article for Bloomberg Law, we discuss the legal questions arising out of the announcement by William Hinman (SEC Director of the Division of Corporate Finance) that ether and bitcoin—the popular cryptocurrencies—would not qualify as securities.  Numerous news organizations, as well as FinTech and cryptocurrency blogs, jumped on the announcement, reporting it as a major clarification regarding the legal status of cryptocurrencies and initial coin offerings.  Unfortunately, there is a real risk that, rather…

Last month we reported on an SEC decision to take additional time to consider whether to approve a request to list five Bitcoin-related exchange-traded funds (ETFs) on one of the New York Stock exchange markets.  That pattern is now being repeated.  On December 4, 2017, NYSE Arca, Inc. filed with the SEC a proposed rule change to list and trade the shares of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF.  On March…

Depending on which U.S. government  agency one looks to, cryptocurrencies can be a security (per the SEC), a commodity (per the CFTC), property (per the IRS), or a form of money (per FinCEN).  In a Legal Advisory issued on June 18, the U.S. Office of Government Ethics took the position that virtual currency qualifies as “property held … for investment or the production of income” under the Ethics in Government Act.  As a result, Executive branch employees are…

On June 11 Wells Fargo became the latest major U.S. bank—with JPMorgan Chase, Bank of America, and Citigroup—to put in place a prohibition against using its credit cards to purchase cryptocurrency.  Despite Wells Fargo’s attempt at a low-key implementation, the ban was quickly picked up by a raft of news organizations.  A spokesperson for Wells Fargo issued the following statement: “Customers can no longer use their Wells Fargo credit cards to purchase cryptocurrency.  We’re doing…

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…