Blockchain and the Law

Category Archives: SEC

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SEC Director William Hinman: “Current offers and sales of Ether are not securities transactions”

At last week’s Yahoo! All Markets Summit in Palo Alto, SEC Division of Corporation Finance Director William Hinman delivered a speech sure to send shockwaves through the crypto world. Applying the Howey test (which sets forth the elements necessary for determining whether a transaction involves the offer or sale of an “investment contract” and thus, … 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

Ripple Faces Class Action Lawsuit Alleging Sale of Unregistered Securities

A class action lawsuit was filed on May 3rd against Ripple Labs Inc.—a fintech startup that controls the third-largest cryptocurrency in the world—and its CEO Brad Garlinghouse, alleging that Ripple sold unregistered, non-exempt securities in violation of federal and California state securities laws. In their complaint, Plaintiffs characterized the sale of XRP (Ripple’s native token) … Continue Reading

SEC Flexes Funny Bone in Fictional Token Offering

The Securities and Exchange Commission (the “SEC”) has taken to using humor and sarcasm to educate retail investors about the potential risks of purchasing tokens in initial coin offerings (“ICOs”). This week, the SEC issued a press release presenting “a hot investment opportunity.”  The release pointed to a website touting the HoweyCoin—a fictional crypto token … 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

SEC and CFTC Chairmen Testify before Senate on Cryptoasset Regulation

Last month, SEC chairman Jay Clayton and CFTC chairman Christopher Giancarlo testified before the Senate Banking Committee on their agencies’ regulatory efforts with respect to cryptoassets and ICOs. The written testimonies of chairmen Clayton and Giancarlo, as well as their verbal statements at the hearing itself, shed light on various issues including:  how tokens might … Continue Reading

New SEC Probe of ICO Issuers and SAFT Structure

The Wall Street Journal recently reported that the SEC has issued dozens of subpoenas and information requests in connection with sales and pre-sales of initial coin offerings. As we have previously noted, the SEC Enforcement Division’s Cyber Unit has been targeting ICOs in recent months, and the SEC has provided a number of public statements … 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

Chairman Clayton Asks Lawyers to Knock it Off with the Unregistered Coin Offerings

In his recent remarks at the Securities Regulation Institute, SEC Chairman Jay Clayton had some stern words for market professionals, especially lawyers, involved in initial coin offerings (ICOs).  He expressed concern that lawyers in the space “can do better” in their role as gatekeepers to the securities markets, particularly in advising clients whether the “coin” … Continue Reading

SEC Temporarily Suspends Trading of UBI Blockchain Internet, Ltd. Over Questions as to Disclosure

On Monday, the U.S. Securities and Exchange Commission (SEC) halted all trading in the stock of the Hong Kong-based firm, UBI Blockchain Internet, Ltd. (OTC ticker UBIA).  “The commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed company,” the … Continue Reading

Implications for Launch of tZERO, First U.S. Registered ATS

The world’s first SEC-registered cryptocurrency exchange may be just around the corner. As detailed in their October 24 Form 8-K, Overstock.com subsidiary tZERO has entered into a joint venture with The Argon Group and RenGen LLC to launch a U.S. registered Alternative Trading System (“ATS”) for digital tokens. If successful, the tZERO ATS may represent … 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

SEC Chairman Jay Clayton’s Remarks on ICOs

In his remarks at a recent Practicing Law Institute program on securities regulation, Securities and Exchange Commission Chairman Jay Clayton once again addressed Initial Coin Offerings, or ICOs.  Mr. Clayton highlighted several issues in particular, including that in his view there is a lack of information about many online platforms that list and trade virtual coins or … Continue Reading
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