The Security and Exchange Commision recent actions on two Initial Coin Offerings (ICOs) could mean the downfall for many projects.
SECs New Ruling
SEC states that the ICOs Paragon and AirFox have to refund $12 million and $15 million respectively to investors. The two companies sold digital tokens in initial coin offerings but violated securities offering registrations. Both companies agree to return funds to harmed investors and register the tokens as securities instead of utilities.
According to the SEC’s orders, both CarrierEQ Inc. (Airfox) and Paragon Coin Inc. conducted ICOs in 2017. They raised money through ICOs even though the commission warned startups to follow regulation, according to the report of Investigation. Airfox, a Boston-based startup, raised approximately $15 million worth of digital assets. They raised the money to finance its development of a token-denominated ecosystem. Starting with a mobile application that would allow users in emerging markets to earn tokens and exchange them for data. Paragon, an online entity, raised approximately $12 million worth of digital assets to develop and implement its business plan. Neither Airfox nor Paragon registered their ICOs under the federal securities laws. Nor did they qualify for an exemption to the registration requirements.
“We have made it clear that companies that issue securities through ICOs are required to comply with existing statutes. As well as rules governing the registration of securities,” Said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division. “These cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws concerning digital assets.”
SEC could create bigger issues for ICOs
In its document, the SEC states that many ICOs did not follow existing guidelines regarding registrations of securities. Therefore, investors can sue the ICOs to get their money back. AirFox and Paragon are just two cases, and there might be many more to follow in a not too distant future.
“By providing investors who purchased securities in these ICOs with the opportunity to be reimbursed and having the issuers register their tokens with the SEC, these orders provide a model for companies that have issued tokens in ICOs and seek to comply with the federal securities laws,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division.
ICOs is not the only part of the cryptocurrency world that the SEC is dealing with. They are also responsible for deciding the fate of the crypto Exchange Traded Funds (ETF). Currently, SEC has rejected all ETFs that have come in its way. However, it might only be a matter of time before one or more becomes accepted. Some think that an approved ETF could attract billions.
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Dennis Sahlström has been trading and investing since 2012 and has for the last two years been consistently profitable. He has been in the crypto- and blockchain space since the middle of 2017 and realized its potential for our world, not least how it is transforming the society we live in. He has now created an education platform, together with the wealth coach Marcus the Maria. They teach regular people how to invest and trade in the cryptocurrency market with proven strategies. If you want to learn more and feel like its time to get into this new asset class, download our free book and register to the next live training to get your future in cryptocurrencies started.