Barely a week after the Etherdelta news hit the press, the SEC is making crypto headlines again, not with one but with two simultaneous actions ("undoubtedly a wave of new enforcement actions will be hitting the press in the next 6-12 months"
, we wrote last week).
an excellent summary and analysis on The Block, if you want to read something let it be that.
But that wasn't all. The SEC then went on to publish
a broader industry statement covering pretty much all actors in the space, from ICOs, to funds and exchanges. The statement seems to be connecting all the dots, from The DAO report to Munchee, Etherdelta and now Airfox/Paragon. For more on that we reccommend picking up Jake's tweetstorm
from 6/ onwards, where sheds some lights on the SEC's overall strategy of leaving the rules "vague & ambiguous".
The most interesting points to take away:
1/ "there is a path to compliance with the federal securities laws going forward, even where issuers have conducted an illegal unregistered offering of digital asset securities.".
This is a helpful statement that can be interpreted as largely supportive of the category as a whole, potentially opening up to a phase of 'compliant ICOs' that we don't quite know what will look like (hopefully to be addressed in the recently promised 'plain English' SEC guidance)
2/ the SEC didn't go after fraud nor misrepresentation, which means that non-outright scams are equally potentially liable if they've sold unregistered securities or haven't qualified for an exemption.
3/ the civil penalties imposed seem fairly light: $250k plus compliance requirements for having raised $12M and $15M respectively. I suspect many non-compliant issuers felt relieved, though such fines presumably reflect full cooperation from the issuers.
4/ not so relieved about the refund requirements though: issuers are required to refund *USD amount* raised plus interest to investors (US-based ones only?) who submit timely claims and can/want to prove they are entitled (even those who sold for a loss already!), which could be disastrous for those projects who raised in ETH, had no/poor treasury management and whose tokens are down +80% since ICO. This will most likely lead to a wave of bankruptcy proceedings.
5/ both actions appear to be carved out of a template for ICO enforcement, with similar/identical language throughout. So we more or less know what to expect for the upcoming actions.