Former Louisiana deputy sheriff and Russian resident Steven Seagal agreed to a Cease and Desist (“C&D”) Order by the SEC, finding violations of the non-touting provisions of Securities Act § 17(b) and imposing civil penalties for acting as a Twitter and Facebook “brand ambassador” for cryptocurrency Bitcoiin2Gen without disclosing it was a paid endorsement.
The Order required Seagal to forego such opportunities for any issuer for three years, disgorge his endorsement fees and pay a civil penalty of a like amount over the coming year.
In 2017, the SEC’s Office of ...
On November 29, the Securities and Exchange Commission (SEC) announced in a press release that it has settled charges against two celebrities for promoting investments in ICOs without disclosing payments received for the promotion. The SEC has previously indicated in a November 2017 statement to the public that investors should be wary of celebrity-backed ICOs, but these are the SEC's first cases against celebrities for promoting ICOs for compensation without appropriate disclosures.
Music producer Khaled Khaled (known as DJ Khaled) and professional boxer Floyd Mayweather ...
Earlier this week, SEC Enforcement staff lost a bid for a preliminary injunction against a prospective ICO in its pre-offering testing phase.
Blockvest was preparing for an ICO of "BLV" tokens. Its website touted the endeavor as the "first licensed and regulated tokenized cryptocurrency exchange and index fund based in the United States," and showed pictures of the seals of the SEC, CFTC, NFA, and others. It also claimed to be regulated by the fictitious "BEC" (Blockchain Exchange Commission), which not coincidentally appeared to share the same Washington address as the SEC.
So how ...
In a November 16, 2018 Statement on Digital Asset Securities Issuance and Trading, the Securities and Exchange Commission (SEC) announced its current position on regulation of blockchain and other distributed ledger technologies. In its Statement, the SEC emphasized that "market participants must still adhere to our well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated form or using new technologies, such as blockchain."
The Statement relied on ...
Last Friday, November 16, the SEC issued a pair of settled actions setting a de facto standard of compliance for unregistered ICOs wanting to "come in from the cold." In each of them, the ICO offeror paid a $250,000 monetary penalty, registered its ICO as security, and entered a rescission undertaking respecting all tokens issued to date.
The first was a settled action by Paragon Coin - a digital token ("PRG") unregistered offeror in the cannabis industry. Paragon agreed to cease and desist, file a registration statement, and publicly offer rescission of the ICO. The Commission cited ...
On October 3, 2018, the Securities and Exchange Commission sued Blockvest LLC and its founder Reginald Buddy Ringgold, III for falsely claiming that its initial coin offering had been approved by the SEC. The complaint, filed in the United States District Court for the Southern District of California, Case No. 18-CV-2287-GPC, sought a return of improperly obtained funds as well as a temporary restraining order to "halt the fraudulent offer and sale of unregistered securities" by Blockvest and to freeze the assets of both Blockvest and Ringgold.
The SEC's complaint alleges that ...
This is Part 2 of a seven-part series of posts looking at some broad legal issues affecting crypto-currencies.
State and federal regulators, especially the SEC, have moved aggressively to halt unregistered initial coin offerings ("ICOs") as unregistered securities sales, where the tokens involved have the attributes of equity in return for money, goods, or services. The SEC first asserted its jurisdiction over token ICOs in its § 21(a) Report on The DAO. Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO, Rel. No. 34-81207 (SEC, July ...
This is Part 1 of a seven-part series of posts looking at some broad legal issues affecting crypto-currencies.
DLT vs Territorial Law.
Fiat currencies have declared value stemming from governmental regulation. And "governments" typically are territorial jurisdictions, exercising the fundamentally territorial concepts of law and regulation.
Cyber-currencies function on the blockchain, a distributed ledger technology ("DLT"). Because DLT is - and fundamentally must be - decentralized and distributed, it defies conventional notions of, and structures for, the ...
Earlier this month the United States District Court for the Northern District of California issued its opinion denying several motions to dismiss, including one filed by the Tezos Foundation, regarding class allegations stemming from Tezos' July 2017 initial coin offering ("ICO"). This lawsuit, In Re Tezos Securities Litigation (3:17-cv-06850), is a consolidated class action resulting from an ICO conducted by Tezos in July of 2017 in which the plaintiffs, investors in the ICO headed by lead plaintiff Arman Anvari, seek rescission of their contributions to the ICO as well as ...