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SEC tightens the noose on ICO-funded startups

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Re: SEC tightens the noose on ICO-funded startups

#71

Post by gamblor956 »

browsercoin wrote: post #42

Had an interesting conversation if you have been involved in any ICO sales and live in North America, seek legal counsel immediately . Do not listen to idiots telling you this is good for the space, they don't know just how much reach SEC has when it comes to securities fraud. The investigation will likely span many years but they will eventually get to your ICO and will hit you with wire fraud and felony, which won'…

The SEC can't impose jail time as punishment for securities law violations, as their tools are limited to civil sanctions (see, e.g., the slam dunk case they had against Elon Musk). However...they can refer cases to the DOJ for criminal prosecution (see Martha Stewart, Elizabeth Holmes, etc.).

Re: SEC tightens the noose on ICO-funded startups

#72

Post by wpietri »

Nav_Panel wrote: post #43

From the article: > subpoenas... focusing on those that failed to properly ensure they sold their token exclusively to accredited investors... The idea of an accredited investor in this context seems either a little silly or like a major philosophical problem for tokens, depending how you view it. What does it mean to be an accredited investor, anyway? From Matt Levine[1]: > Under U.S. law, some financial products, l…

I'd put it differently than Levine. An accredited investor is one who can afford enough advice to somewhat level the playing field with scam artists. That serves the interests of both individual investors and of society, which wants to minimize the ROI of scams.

He's right that there could be more sophisticated tests for "knows what they're doing". But this one has the advantage of being very simple and easy to enforce.

Re: SEC tightens the noose on ICO-funded startups

#73

Post by gamblor956 »

JumpCrisscross wrote: post #6

Cooley's invention of the Simple Agreement for a Future Token (SAFT) [1] was genius. Not only did they earn fees on selling people the boondoggle, they'll also cash in on defending every company, and every employee at said company, who unlawfully sold these securities. [1] https://saftproject.com/static/SAFT-Project-Whitepaper.pdf

More likely, Cooley will see massive legal malpractice lawsuits if any of their crypto clients get sued by the SEC or DOJ. While not likely to kill the firm, those sorts of suits could result in significant client and partner losses.

Re: SEC tightens the noose on ICO-funded startups

#74

Post by Animats »

The SEC seems to be sorting the list of ICOs by level of criminality and size, and working down the list. First they went after the ones which were large, obvious, out and out criminal enterprises. As in [1], or "they really didn't have the real estate and diamonds they said they had." And [2], or "they really didn't have deals in place with PayPal, Boeing, and Disney".

Then the SEC went after the ones that were merely flaky. As in [3], or "a blockchain based food review service with in-app purchasing of tokens". This actually got going, not that anybody used it much. They hired a "YouTube influencer" and claimed “199% GAINS on MUN token at ICO price! Sign up for PRE-SALE NOW!”

Along the way, the SEC found some ICOs from the usual suspects in the penny stock market. Those got shut down.

Then they started sending out letters along the lines of "Hello, ICO promoter. What you're doing is probably illegal. Do you want to give the money back now, or do we bring out our big hammer?" This stopped a lot of potential ICOs.

If you haven't seen it, see the SEC's fake ICO site.[3]

I have yet to find an ICO that resulted in a real, operating, profitable business that wasn't some other cryptocurrency/blockchain based thing. We're not seeing ICOs to build factories or farms or do real stuff.

[1] https://www.sec.gov/news/press-release/2017-185-0

[2] https://www.sec.gov/news/press-release/2018-94

[3] https://www.investor.gov/additional-resources/news-alerts/pr...

[3] https://www.howeycoins.com

Re: SEC tightens the noose on ICO-funded startups

#75

Post by wmf »

CryptoPunk wrote: post #61
gfodor wrote: post #7

The "utility token" meme was hilarious in the community basically talking itself into the idea that the SEC was going to write a bunch of new laws and/or interpret the existing ones in the most favorable light to those raising ICOs. Playing with fire.

The SEC doesn't create law. Courts do. It can claim anything it wants, but until its argument is tested by a court, it's not law. There continue to be strong legal arguments for utility tokens not being securities: https://www.coinbase.com/legal/securities-law-framework.pdf This attitude of deferring to regulatory agencies, which have their own set of institutional biases, on the question of the applicability of secu…

Utility tokens aren't securities, but the problem is that there are no utility tokens. Everything calling itself a utility token isn't, because they're all marketed as investments (maybe with the exception of SiaCoin).

Re: SEC tightens the noose on ICO-funded startups

#76

Post by Karunamon »

CPLX wrote: post #31
Karunamon wrote: post #25

Earlier quoted context omitted.

Disastrous for anyone other than those who jumped in without doing their due dilligence? My main gripe with the whole "accredited investor" thing is that its literally legalized classism (and I'd argue a violation of the equal protection doctrine, but that's another theory), as the income requirements eliminate a huge swathe of investing for anyone but the 1%. Nothing is stopping an uninformed investor from loading t…

As a society we believe that allowing people of modest means to be swindled out of their savings is an unacceptable outcome and have enacted a large battery of laws to avoid it. These laws came about from very real and serious experiences that were, in fact, catastrophic for many communities. It's a real live problem, and it goes back a long way. If you want to argue about the details that's great, but any discussion…

>If you want to argue about the details that's great, but any discussion has to start with the reality that an unregulated market leads to really unwanted outcomes here.

Then it's a good thing nobody here, least of all me, asked for "unregulated markets". Literally your entire post is either responding to points I didn't make, or makes arguments I already addressed, making this exchange a complete waste of time for both of us.

Re: SEC tightens the noose on ICO-funded startups

#77

Post by LambdaComplex »

Animats wrote: post #74

The SEC seems to be sorting the list of ICOs by level of criminality and size, and working down the list. First they went after the ones which were large, obvious, out and out criminal enterprises. As in [1], or "they really didn't have the real estate and diamonds they said they had." And [2], or "they really didn't have deals in place with PayPal, Boeing, and Disney". Then the SEC went after the ones that were mere…

You have two [3]s, just fyi

Re: SEC tightens the noose on ICO-funded startups

#78

Post by 147 »

browsercoin wrote: post #42

Had an interesting conversation if you have been involved in any ICO sales and live in North America, seek legal counsel immediately . Do not listen to idiots telling you this is good for the space, they don't know just how much reach SEC has when it comes to securities fraud. The investigation will likely span many years but they will eventually get to your ICO and will hit you with wire fraud and felony, which won'…

You're saying if somebody is an engineer at a company that helps launches ICOs they should be worried?

Re: SEC tightens the noose on ICO-funded startups

#79

Post by gamblor956 »

CryptoPunk wrote: post #61
gfodor wrote: post #7

The "utility token" meme was hilarious in the community basically talking itself into the idea that the SEC was going to write a bunch of new laws and/or interpret the existing ones in the most favorable light to those raising ICOs. Playing with fire.

The SEC doesn't create law. Courts do. It can claim anything it wants, but until its argument is tested by a court, it's not law. There continue to be strong legal arguments for utility tokens not being securities: https://www.coinbase.com/legal/securities-law-framework.pdf This attitude of deferring to regulatory agencies, which have their own set of institutional biases, on the question of the applicability of secu…

Courts don't create the law, they interpret it (...except in India, where the Supreme Court actually does make laws). The Legislature writes the law.

A security doesn't require a common enterprise, it simply requires that one thing represents an interest in something else. The underlying asset is usually financial or intangible in nature, but that isn't required. There are more specific rules and exceptions, but those vary by jurisdiction.

Re: SEC tightens the noose on ICO-funded startups

#80

Post by sp527 »

There's an argument to be made that it was irresponsible for the SEC to wait this long to clarify their position on enforcement. My guess is they want to deflate this nonsense slowly instead of pop it. It metastasized into a somewhat 'too big to fail' situation before they had time to react properly.
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