SEC Might Put Its Hands on U.S Cryptocurrency Exchanges and ICOs

Tokens continue to take a hit after a senior official from the US SEC made a remark that the Commission has “dozens” of open investigations into initial coin offerings (ICOs).

November 15, 2018 | AtoZ Markets – Bitcoin price has plummeted by 10% over the past 24 hours following a severe sell-off. Still, several low market cap cryptos and tokens have also declined by twice that amount, posting losses in the range of 20%.

Tokens Continue to Take a Hit

Over the past several days, the ERC20 tokens that were launched on top of the Ethereum blockchain network have also performed poorly against the flagship cryptocurrency, Bitcoin and the US dollar.

For example, tokens backed by active developer and investor communities like Ontology, Waltonchain, ICON, Lisk, Golem, WanChain, VeChain, and several others have declined significantly last week.

Moreover, prior to the Coinbase listing, Basic Attention Token (BAT) and 0x (ZRX), which experienced strong short-term upward trends fell by more than 36%.

Is the US SEC Targeting ICO Projects?

Under the existing regulations set forth by local financial authorities in the US, the two tokens, BAT and ZRX listed by Coinbase confirms that they are not considered as securities. The San Francisco-based exchange, however, exercised caution when listing the tokens on its platform.

This is because in an event wherein the tokens listed by Coinbase are identified as securities, the exchange could become a target of the US Securities and Exchange Commission (SEC) for distributing unregistered securities.

According to Jake Chervinsky, a government enforcement defense and securities litigation attorney at Kobre & Kim, it is possible, that the SEC is getting set to take down many crypto exchanges as well as initial coin offering (ICO) projects, with several pending cases in the hands of the commission. Chervinsky was quoted as saying:

“Most enforcement actions are kept confidential until they’re resolved to protect both the defendant (from bad press) & the government (from losses & inconsistencies). That’s why this case was settled before it was announced. On that point, remember all those subpoenas the SEC sent out earlier this year? Just because you haven’t heard about them recently doesn’t mean there aren’t dozens of investigations going on behind the scenes. Sooner or later, the floodgates will open.”

SEC Says: “Dozens” of ICO Investigations Underway

Further, the US SEC has revealed in an official announcement, that EtherDelta co-founder, Zachary Coburn has agreed to pay the sum of $300,000 in disgorgement. Coburn will also pay $13,000 in prejudgment interest as well as $75,000 penalty. This shows that the case between Coburn and the SEC was settled prior to the release of the statement.

Meanwhile, Stephanie Avakian, a co-director of the SEC’s Enforcement Division has confirmed at the Investment Adviser Association conference held in Washington, D.C., that dozens of investigations into ICOs are underway and expects to see more in the future. As per Bloomberg, she further added:

“We are very active, and I would just expect to see more and more.”

ICO Projects Now Shaky

In the near future, the cryptocurrency sphere is expected to see several pending cases against a number of crypto exchanges and ICO projects brought up by the Commision. In the ICO market, The regulatory uncertainty surrounding tokens could further diminish the confidence of investors and the market towards small market cap cryptocurrencies.

When that happens, it could further lead to a bleed out for tokens until the SEC offers a transparent guideline that would provide clarity in the crypto space.

Earlier, AtoZMarkets reported that the co-founder of EtherDelta, Zachary Coburn and the exchange were charged by the SEC with the distribution of unregistered securities. This, however, suggests that the Commision has cooperated with Coburn to understand the nature of dozens of tokens considered securities under US regulations.

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