SEC Takes Unprecedented Legal Action Against Two Cryptocurrency Firms
For much of 2018, the SEC has been more vigilant in scrutinizing the cryptocurrency industry and has escalated its crackdown on crypto-related firms and projects who are not complying. Among their first enforcement actions happened just this month against TokenLot and Crypto Asset Management (CAM).
TokenLot Gets the Boot
On September 11th, the SEC filed an enforcement action against the online platform TokenLot for being an unregistered broker-dealer. The SEC in their reasoning said that from July 2017 to February 2018, TokenLot was selling itself as a broker and was responsible for directly facilitating a total of nine ICOs during this time.
The platform itself was a space where individuals could be involved in ICOs. As such, they participated in the secondary sales of over 200 ICOs which were all listed on their website. Often, TokenLot incurred a profit by buying the ICO tokens at discount and selling them at retail on their website for much higher.
Because TokenLot was never registered with the SEC nor as a broker, they were charged. Their platform is now closed.
Another Crypto-firm Charged on the Same Day
Crypto Asset Management (CAM) was another firm that had an enforcement action filed against them on the same day as TokenLot.
CAM was responsible for their Crypto Asset Fund which was an investment vehicle meant to aggregate some of the largest cryptocurrencies into one fund. From August 1st to December 1st of 2017, the SEC has said that CAM made some $3.6 million from 44 investors.
Rather than engage through formal channels, CAM engaged in solicitation through chats, social media accounts, and the company website to garner their funds. Cam was charged with violations of securities laws. These included:
- Selling unregistered securities
- Not being registered as an investment company
- Material misrepresentations and omissions
Due to these negligence, they were forced to pay $200,000 in civil penalties. All offerings of their services have been halted.
The Bottom Line
The reality is that today the SEC has been more and more pressing when it comes to monitoring the cryptocurrency space.
Entities and individuals need to understand that many of the cryptocurrency transactions they currently do, especially when dealing with ICOs, involve the offer or sale of a security.
Although SEC officials have said that Bitcoin and Ethereum are not securities, many of the tokens currently in circulation are since they are purely speculative.
Do you think the SEC is getting ready to expand its crackdown? Is it time for a new concept of tokenized securities for a proper regulatory environment? You tell us in the comments below.
Image courtesy of Toshi Times.