In the latest crypto news, we have the US Securities and Exchange Commission (SEC) and a new round of regulation efforts from it. A new press release that apparently shuts down two cryptocurrency-related startups which have reached settlements with the agency for failure to register their tokens as securities or their token sales as securities offerings.
Since 1934, the United States law sees selling anything that can resemble an investment contract (virtually) without first registering with the SEC or applying for an exemption. The Securities Act of 1934 was designed to prevent future crashes on the order of the crash of 1929 which led to the “Great Depression.”
Paragon and Airfox (officially registered as CarrierEQ) are the names of the startups which have been banned. Paragon, for example, sold $12 million in tokens but has a market capitalization of not quite $3,000,000 and as such it would seem that there are people interested in pursuing as much.
As the press release by the SEC reads:
“The orders impose $250,000 penalties against each company and include undertakings to compensate harmed investors who purchased tokens in the illegal offerings. The companies also will register their tokens as securities pursuant to the Securities Exchange Act of 1934 and file periodic reports with the Commission for at least one year. Airfox and Paragon consented to the orders without admitting or denying the findings.”
The settlement also illustrates one non-fraud ICO case and the point 17 in the Paragon document illustrates a familiarity with token technicalities, reading:
“PRG tokens were distributed to purchasers on October 22, 2017, on the Ethereum blockchain using the ERC-20 protocol.”
The Enforcement Co-Director at SEC, Steven Pelkin, also believes that the enforcement actions against Airfox and Paragon will help stimulate the registration of other US-based ICOs in advance of further non-fraud prosecution.
“By providing investors who purchased securities in these ICOs with the opportunity to be reimbursed and having the issuers register their tokens with the SEC, these orders provide a model for companies that have issued tokens in ICOs and seek to comply with the federal securities laws,” he stated.
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