Blockchain and the Law

Category Archives: Enforcement Action

Subscribe to Enforcement Action RSS Feed

When is a Token More Than a Token? SEC Settlement over Anti-Touting Provision Raises Familiar Questions

On July 14, 2021, the Securities and Exchange Commission (“SEC”) settled an action against the operator of a platform that promoted current and upcoming digital token offerings for violations of the anti-touting provision of the Securities Act of 1933.  In the Matter of Blotics Ltd. f/d/b/a Coinschedule Ltd. (July 14, 2021).  The SEC claimed that … Continue Reading

DOJ Tax Division Shows Sustained Interest in Cryptocurrency

On May 5, 2021, another federal district court, this time for the Northern District of California, permitted the IRS to proceed with a John Doe summons very similar to the one served on Circle last month (the subject of a recent post).  This time, the Summons seeks information on customers of a San Francisco-headquartered digital currency … Continue Reading

A Warning to Cryptocurrency Users from the Justice Department’s Tax Division

As you might expect during tax season, the Justice Department’s press releases seem particularly focused on tax-related issues these days.  At the start of this month, DOJ sent a stern reminder to the public that non-traditional currency users should not expect to escape federal tax law enforcement. Read the full blog post on Proskauer’s Corporate Defense blog.… Continue Reading

SEC Division of Examinations Releases Risk Alert for Digital Asset Securities

On February 26, 2020, the Security and Exchange Commission’s (“SEC”) Division of Examinations (the “Division”) published a Risk Alert, “The Division of Examinations’ Continued Focus on Digital Asset Securities.” In the Risk Alert, the Division offered insight into its current examination focus with respect to the activities of market participants, including investment advisers, concerning digital … Continue Reading

Three Critical Questions That Will (Hopefully) be Answered by the SEC’s Lawsuit against Ripple

Late last year, the SEC filed a litigated action in the U.S. District Court for the Southern District of New York against Ripple Labs Inc. and two of its executive officers (collectively, “Ripple”), alleging that Ripple raised over $1.3 billion in unregistered offerings of the digital asset known as XRP. Ripple opted not to file a motion … Continue Reading

SEC Brings Charges against Individuals Behind Allegedly Fraudulent Unregistered Digital Asset Securities Offering

On February 1, 2021, the U.S. Securities and Exchange Commission (SEC) announced that it had brought charges against several individuals involved in an alleged scheme to induce investors to transfer more than $11 million to buy into an unregistered initial coin offering (ICO) of B2G tokens, which the SEC claimed was merely an elaborate sham. … Continue Reading

SEC Settles Charges Against Enigma MPC for its Unregistered ICO

On February 19, 2020, the U.S. Securities and Exchange Commission (SEC) settled charges against Enigma MPC (Enigma) related to Enigma’s 2017 issuance of “ENG Tokens”. The SEC found Enigma engaged in an unregistered initial coin offering (ICO), in which it offered and sold securities in violation of Sections 5(a) and 5(c) of the Securities Act … Continue Reading

Trump Administration Plans to Introduce New AML Requirements for Cryptocurrencies

Treasury Secretary Steven Mnuchin remarked before a hearing of the Senate Finance Committee three weeks ago that “significant new requirements at FinCEN” for cryptocurrencies would be introduced quickly, in response to Senator Maggie Hassan’s (D-NH) question regarding the Treasury Department’s proposed use of budget increases for anti-money laundering (AML) and counterterrorism efforts (video of the … Continue Reading

SEC Attempts to Halt Telegram’s Planned Token Distribution

On October 11, 2019, the SEC filed an emergency action to stop Telegram (Telegram Group Inc. and its wholly owned subsidiary TON Issuer Inc.) from continuing its offering of tokens. Telegram raised approximately $1.7 billion in early 2018 through the sale of its tokens, dubbed “Grams”, which it originally committed to deliver to purchasers from … Continue Reading

SEC Sues Kik for ICO

On June 4, 2019, the U.S. Securities and Exchange Commission (the “SEC”) filed a complaint in the Southern District of New York against Kik Interactive Inc. (“Kik”) alleging violations of Section 5 of the Securities Act of 1933 (the “Securities Act”). The complaint arises from Kik’s offer and sale of $100 million worth of blockchain-based … Continue Reading

Airfox and Paragon Settle with SEC for Unregistered ICOs: Civil Monetary Penalties Imposed; Rescission and Registration Required

On November 16, the SEC announced that it settled charges against CarrierEQ, Inc. (“Airfox”) and Paragon Coin, Inc. (“Paragon”) for securities offering registration violations in connection with their respective initial coin offerings (“ICOs”). The settlement orders represent the first time the SEC has imposed civil penalties against ICO issuers solely for securities offering registration violations … Continue Reading

Registration Requirements for “Decentralized” Exchanges under the Federal Securities Laws: The Case of EtherDelta

On November 8, the SEC announced that it settled charges against Zachary Coburn, founder of EtherDelta, a type of non-custodial digital asset trading platform commonly referred to as a “decentralized exchange” or “DEX.” Coburn was charged with causing EtherDelta to operate as an unregistered securities exchange in violation of Section 5 of the Securities Exchange … Continue Reading

Crypto Crackdown – SEC Imposes Broker-Dealer and Investment Company Registration Provisions on Token Traders and a Crypto Fund

The SEC announced a pair of settled orders on Tuesday extending additional provisions of the securities laws over ICOs and other digital assets – the agency’s first ever enforcement actions of their kind. As the SEC has been suggesting for over a year, because digital assets offered and sold in initial coin offerings (“ICOs”) are … Continue Reading

Federal Judge Rules Securities Laws May Cover ICOs

U.S. District Judge Raymond Dearie of the Eastern District of New York has ruled that initial coin offerings (ICOs) may be subject to securities law. The ruling came in the court’s denial of defendant Maksim Zaslavkiy’s motion to dismiss an indictment that alleges that he committed securities fraud for selling tokens that he claimed represented … Continue Reading

Another SEC Enforcement Action against Allegedly Fraudulent ICO

On May 29, the SEC announced that it had secured injunctive relief halting an allegedly “ongoing fraud” involving an unregistered, non-exempt ICO that raised as much as $21 million in cryptoassets. The SEC’s complaint charges Titanium Blockchain Infrastructure Services, Inc., EHI Internetwork and Systems Management, Inc. and Michael Stollery, (collectively, the “Titanium defendants”) with fraud … Continue Reading

Regulatory Scrutiny of the ICO Market – What Fund Managers Should Know

Last week, former CFTC Chairman Gary Gensler explained in remarks at M.I.T. that he believes the second and third most widely used virtual currencies—Ether and Ripple—may have been issued and traded in violation of securities regulations.  This comes on the heels of a crackdown on cryptocurrency-related securities by the SEC, which is particularly focused on … Continue Reading

FTC Freezes Assets and Operations of Four Promoters of Cryptocurrency Investment Schemes

The Federal Trade Commission (FTC) recently sought and received a temporary restraining order (TRO) against four promoters of alleged pyramid schemes involving cryptocurrencies. The promoters were charged with violating the FTC Act’s prohibition on unfair or deceptive acts or practices in or affecting commerce. The FTC’s complaint (filed under seal in the U.S. District Court … Continue Reading

Federal Court Grants Preliminary Injunction, Affirms CFTC Jurisdiction over Virtual Currencies

Earlier this month, Judge Jack B. Weinstein of the U.S. District Court for the Eastern District of New York entered a preliminary injunction order against Patrick McDonnell and his company, CabbageTech, Corp. (together, the “Defendants”). In a landmark ruling, the order upheld the CFTC’s position that “virtual currencies” are commodities subject to CFTC jurisdiction under … Continue Reading

BitConnect Promoters Targeted in Class Action Suits, Twice in One Week

BitConnect International, PLC had a somewhat unique business model, even for an industry known for its unconventional nature.  On its face, BitConnect functioned as an exchange. However, the real purpose of the platform, and what led to its ultimate downfall, was its lending program. BitConnect “borrowed” the crypto investments of its customers in exchange for … Continue Reading

Alleging Fraud, SEC Shuts Down AriseBank’s Celebrity-Endorsed ICO of Purported “Decentralized Bank”

In its latest effort to combat scams in the initial coin offering (ICO) space, the SEC announced today that it has obtained a court order cutting off AriseBank’s ICO of “AriseCoin” tokens, appointing a receiver over AriseBank and freezing AriseBank’s and its co-founders’ digital and other assets. The SEC’s complaint against AriseBank and its co-founders … Continue Reading

Busy day for CFTC and SEC Cryptocurrency Regulators: Enforcement Actions, a Public Letter, and Joint Statement

The CFTC and SEC made numerous headlines Friday in their ongoing efforts to provide regulatory oversight of cryptocurrency markets. The CFTC announced the filing of two civil enforcement actions against allegedly fraudulent cryptocurrency-related investment schemes. The SEC’s Division of Investment Management, meanwhile, issued a letter raising concerns about registered investment companies’ (including ETFs’) investments in … Continue Reading

Further SEC action and guidance with respect to ICOs and cryptocurrencies

The SEC took two additional steps today in its regulation and oversight of the initial coin offering (“ICO”) and cryptocurrency markets. In the SEC’s latest action targeting an ICO, the SEC Enforcement Division’s new Cyber Unit intervened in an attempted ICO by Munchee, Inc., an online food review service with plans to build out its network … Continue Reading

SEC Cyber Unit Targets PlexCoin

On December 4, the SEC’s new Cyber Unit announced it obtained an emergency asset freeze to halt the initial coin offering (“ICO”) of PlexCoin. According to the SEC, the Plexcoin ICO had raised up to $15 million to date through the fraudulent sale of unregistered securities. This is the first-ever enforcement action by the SEC’s … Continue Reading

Third Class Action for Tezos ICO

For the third time this month, the Tezos blockchain project is the subject of a class action complaint for claims arising from their $232 million July initial coin offering (“ICO”). Consistent with both prior lawsuits, the plaintiffs allege that the Tezos ICO constituted the unregistered, non-exempt offer and sale of securities in violation of the … Continue Reading
LexBlog

This website uses third party cookies, over which we have no control. To deactivate the use of third party advertising cookies, you should alter the settings in your browser.

OK