SEC Takes Down Two Crypto Startups for Failing to Register Their Tokens As Securities
SEC has been dealing with fraudulent initial coin offerings (ICOs), along with ICOs that simply are not following registration requirements for the sale of securities.
On Friday, Nov. 16, the SEC announced “settled charges against two companies that sold digital tokens in initial coin offerings (ICOs).”
Paragon Coin and CarrierEQ were both hit with fines after failing to the register sales of its tokens – cryptographic assets similar to cryptocurrencies – with regulators. Both companies are now required to offer to compensate investors who still hold the tokens or who sold them at a loss.
The penalties that the SEC sought to impose against these, and other companies in its crosshairs, are relatively light: return funds to investors, register the tokens as securities and pay a fine. The SEC believes this should be enough to “tell those who are considering taking similar actions.
Without admitting or denying the charges, both Airfox and Paragon agreed to do just that, in addition to “filing periodic reports with the Commission.”
Samuel Dibble, a partner at the law firm Baker Botts, said the settlement constituted regulation by enforcement, with it still unclear what rules ICOs should follow.
“Coins and tokens are subject to securities fraud and these rulings make that clear,” he said. “We’re still waiting for affirmative action on what regulatory process is allowed. It doesn’t move the ball forward, the SEC is still only telling us what you can’t do.”.
Taking away equity that a company earned basically defeats the purpose of having a token sale in the first place. Left with no profit or funding, ICOs will starve out of existence. However, as many critics of the SEC’s regulations in the crypto world believe, this could be the side effect that the SEC has been working towards this whole time.
This is *by far* the most important & helpful statement from the SEC on crypto regulation yet.
HERE: “[T]here is a path to compliance with the federal securities laws going forward, even where issuers have conducted an illegal unregistered offering of digital asset securities.” https://t.co/u5DlcfBGBN
— Jake Chervinsky (@jchervinsky) November 16, 2018
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