As we have seen from the recent crackdown on two initial coin offerings (ICOs) by the US Securities and Exchange Commission (SEC,) Paragon and AirFox, the situation could also lead to many other blockchain and crypto projects that would declare bankruptcy in the coming months. This is what is making headlines in today’s crypto news.
As we reported earlier, both Paragon and AirFox were served a fine of $350,000 from the SEC and a refund to all the investors who participated in the token sale.
The problem, right now, is that the two tokens have been asked by the US SEC to refund $12 million and $15 million accordingly to their investors. Since their ICOs, the prices of cryptocurrencies like Bitcoin and Ethereum has declined substantially, blockchain projects have used most of their funds from their token sales in order to fund operations.
“Both companies have agreed to return funds to harmed investors, register the tokens as securities, file periodic reports with the Commission, and pay penalties.”
Aside from this, another issue for ICOs is the right to sue projects to be compensated for their losses, which the SEC clearly outlined. In other words, if an investor invested in a token and recorded a 80% loss, they are eligible to file a lawsuit against the initiator of the token sale and eventually receive the funds back.
“On a date no later than sixty (60) calendar days… distribute by electronic means reasonably designed to notify each potential claimant, notice and a claim form, both of which shall be in a form not objected to by Commission staff, informing all persons and entities that purchased PRG potential claims under Section 12 (a) of the Securities Act, including the right to sue “to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if [the purchaser] no longer owns the security.”
Upon this crackdown, the co-director of the SEC’s Enforcement Division, Stephanie Avakian, heavily emphasized that the SEC will continue to investigate token sales which violated federal security laws with the intent of bringing down ICOs considered as securities by the commission.
“We have made it clear that companies that issue securities through ICOs are required to comply with existing statutes and rules governing the registration of securities. These cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets,” she concluded.
Russian State Duma To Review Crypto Regulation: Preparing For Oil-Backed Crypto
“Perhaps the oil-backed cryptocurrency will be the pioneering project that will create a reliable structure for the cryptographic market as a whole," he concluded.
Thailand Legislative Assembly Permits Issuing Of Tokenized Securities
Texas Regulator Reaches Agreement With Four Crypto Companies It Previously Accused
“The orders cited a total of 60 individuals and entities. None of the individuals or firms were registered to sell securities in Texas.”
US Regulators Decision On BTC ETF Will Set The Mood For The Crypto Market: KRX
“The US has been the front-runner on the cryptocurrency market and related derivatives, and there are strong voices supporting the launch of Bitcoin ETFs within the market — which is why we are observing the progress and response of the US SEC’s decision on Bitcoin ETFs.”He added that the KRX is considering the provision of a solid Bitcoin index as well which will be required for the launch of such ETFs. South Korea’s blockchain market has seen the launch of blockchain ETFs by investment banks because of the incredibly lower level of scrutiny they get from the national watchdog. A professor at Korea University’s Graduate School of Information Security Lee Kyang-ho argued that the health of the blockchain sector in the country could eventually create a path for crypto ETF integration by saying:
“With the government expanding its investment in research and development of blockchain technology, the projects are expected to minimize or eliminate the risk of integrating ETF transactions in the cryptocurrency market.”
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