BY CNA team - November 3, 2018
SEC has taken over a dozen actions against ICOs in FY18
The US Securities and Exchange Commission (SEC) has brought over a dozen standalone enforcement actions involving initial coin offerings (ICOs) and digital assets in fiscal year 2018 (FY18).
The SEC’s enforcement division’s codirectors, Stephanie Avakian and Steven Peikin, say that action was taken to ensure compliance with the registration requirements of federal securities laws as well as for fraud.
They say in the division’s FY18 annual report that in the past year, dozens of investigations involving ICOs and digital assets, many of them ongoing, have been opened.
The regulator has also suspended trading in the stocks of over a dozen publicly traded firms on concerns regarding their investments in ICOs and operation of cryptocurrency platforms over FY17 and FY18.
The division has also extended its focus beyond the ICO issuers as when the SEC announced a settled order against two individuals running a self-described “ICO superstore” and a hedge fund manager that went against investment-company rules by investing in digital assets.
The codirectors say that the division remains focused on issues related to ICOs and digital assets but recognises the need to balance protection of investors against stifling innovation and legitimate capital formation.
Noting that ICOs have exploded in recent years, they say that “exuberance around these markets can sometimes obscure the fact that these offerings are often high-risk investments”.
They pointed out that issuers often lack track records, viable products, business models, or the capacity for safeguarding digital assets from theft by hackers while “some of the offerings are simply outright frauds cloaked in the veneer of emerging technology”.
On the same day, the Commission filed a settled action against a hedge fund manager that violated an investment company registration provision based on its investments in digital assets.