The SEC’s first move came this past summer when it issued a report involving the ICO of DAO tokens by ‘The DAO.’ At the time of going to print, the SEC had since announced three enforcement actions involving ICOs. The SEC brought its first ICO enforcement action in September 2017 against Maksim Zaslavskiy for offering cryptographic tokens purportedly backed by non-existent diamonds and real estate. Then, in December 2017, the SEC filed an enforcement action against PlexCorps, and instituted an administrative action against Munchee, both for offering tokens that allegedly qualify as unregistered securities. Shortly thereafter, SEC Chairman Jay Clayton issued a public warning to investors and market professionals about ICOs and the risks of investing in cryptocurrencies.
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The SEC’s framework for evaluating its regulatory power over these oferings is becoming clearer over time. Its statements and actions over the past six months provide insight into how the SEC will likely evaluate ICOs and their founders in 2018.
The DAO Report
As the number of ICOs skyrocketed in 2017 and significant amounts of capital poured into these new projects, the SEC turned its attention to cryptographic tokens. On 25 July 2017, it issued an Investigative Report (the ‘Report’) detailing its investigation of an ICO of tokens representing interests in ‘The DAO,’ a decentralised autonomous organisation.
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