The Review of SEC Activity for 9 Months of 2019

The actions of SEC and the statements of its representatives can both crash the cryptocurrency market as well as cheer up its participants. BNT provides an overview of the activities of the SEC for the nine months of 2019.

Opinions

March 2019. Some stablecoins may be regarded as securities. Valerie SZCZEPANIK, SEC's Senior Advisor for Digital Assets, said that an asset can be regarded as a security if:

• the central side can control the value of stablecoin;
• or guaranteed income;
• or it is promised that the price will be controlled.

March 2019. According to Jay CLAYTON, Chairman of SEC, Ethereum is not a security. The SEC also published a report stating that the status of a digital asset may change over time. So, immediately after the issue, cryptocurrency can be sold as a security, but after a while it (cryptocurrency) can transfer to another user no longer as an investment object.

May 2019. At the Consensus 2019 conference, Valerie SZCZEPANIK, SEC's Senior Advisor for Digital Assets, said that exchanges that conduct IEOs on their platforms and are based in the United States should be governed by U.S. securities dealers.

June 2019. During the FinTech Forum, William HINMAN, Director of the Division of Corporation Finance, said that startups that have already issued tokens could put them out of the scope of securities laws. This refers to a situation where digital assets become a tool that does not need to be regulated.

September 2019. As part of the Cryptocurrency Legal Compliance Summit (DACOM), Hester PEIRCE, the SEC Special Commissioner, said that in the future, cryptocurrencies could become “Internet money.”

Decisions

February 2019. SEC accused Gladius Network LLC (which aimed at creating a network for leasing computing power) of attracting investor funds not in accordance with securities laws. The startup decided not to argue with the Commission and agreed to cooperate with the investigation. The project owners promised to return the attracted funds ($12.7 million) to investors and register tokens in accordance with all the rules of the relevant legislation. Since the startup helped the investigation, the department decided not to fine it.

April 2019. SEC forced ETF Amplify and Reality Shares to remove the word “blockchain” from their names, explaining their decision that the name of exchange-traded investment funds should reflect what they offer and not mislead users.

April 2019. Trading of Bitcoin Generation securities was suspended. SEC explained its decision by saying that the information provided by the trading platform may be distorted (including information about ordinary shares and current financial condition).

May 2019. NextBlock founder Alex TAPSCOTT was fined $25,000 for issuing unregistered securities, as well as providing false information in the project description.

June 2019. SEC filed a lawsuit against Kik Interactive Inc., which is the developer of the Kik messenger. The accusation was that the company violated the Securities Act, namely, it carried out an unregistered securities’ sales in 2017. Representatives of Kik, in turn, noted that its tokens cannot be equated with investment contracts and, therefore, with securities.

In August 2019, the SEC filed a lawsuit against Reggie MIDDLETON, founder of the Veritaseum project. The agency claims that $14.8 million was raised by the defendant as part of an unregistered ICO. In addition, the SEC sees signs of fraud in the initial token offering, indicating that the information on the conditions of the token sale was intentionally distorted and investors did not know about the essential details. This news brought down the coin rate by almost 70%.

August 2019. Even the analysts fell under the SEC's disfavor. For example, the Russian-based analytical company ICORating was fined $268,000 for the fact that from December 2017 to July 2018 it did not inform users about the money rewards that it received for the promotion of ICO projects whose coins fall under the US Securities Act.

September 2019. Nikolay EVDOKIMOV, the founder of ICOBox, will have to answer in court for unregistered activities as a broker-dealer, as well as for the company illegally issuing securities.

Positive decisions

July 2019. The SEC approved the first token sale in accordance with the established “A+” provisions. The New York-based company Blockstack was quite lucky. Pocketful of Quarters startup token sale was also approved later.

As we can see, there are much fewer positive SEC solutions for the cryptocurrency market than negative ones. This is due to the fact that the agency currently wants to curb the cryptocurrency market and drive it into a certain regulatory framework. The BNT will continue to monitor the actions of the Commission.