Fresh off of a precedent setting ruling by Judge Dearie, the SEC is as active as ever. In their on-going mission to hold every ICO accountable as a security, they have just formally charged another two. Although each of the following ICOs promised different things, the SEC sees a commonality between the two – each are securities, and are subject to the regulations governing such assets.
Rather than hosting their own ICO, TokenLot functioned as an aggregation platform for on-going ICOs. During their active time, TokenLot dealt with hundreds of different tokens, and received investments from thousands.
By operating in such a manner, the SEC has made it known that TokenLot was acting as a broker/dealer for these assets. With their view that all ICOs are securities, that would make TokenLot a securities broker/dealer – a position that requires licencing and adherence to strict regulations.
It should come as no surprise that a company operating in such a way would be charged by the SEC. In a formal declaration released today, the SEC did just that.
Just as Judge Dearie recently set a precedent by ruling that security laws apply to ICOs, the SEC also makes a first in filing these charges. TokenLot has now become the first company to be charged by the SEC to act as an unlicensed security broker/dealer.
Crypto Asset Management LP (CAM)
With momentum on their side, the SEC set another first today. In addition to charging TokenLot, the SEC has formally charged Crypto Asset Management LP. In their press release, it is stated, “The Securities and Exchange Commission today announced its first-ever enforcement action finding an investment company registration violation by a hedge fund manager based on its investments in digital assets.”
Over the course of 2017, CAM offered a regulated crypto investment fund to investors. Claiming oversight by the SEC, the company received over $3.5 million from interested parties. It wasn’t long before the public was made aware that the fund was not regulated by the SEC.
Speaking on the situation was Co-Chief of the Asset Management Unit, C. Dabney O’Riordan. He stated, “Hedge funds seeking to ride the digital asset wave continue to proliferate…Investment advisers must be sure that the funds they offer adhere to the applicable registration obligations and must accurately represent their funds’ regulatory status to investors.”
This week saw multiple firsts with regards to ICOs and security regulations. With these hurdles now cleared, the next few months will surely see a bevy of new charges being laid. Despite this, the SEC encourages innovation. They simply want companies to adhere to their rules. Co-Director of the SEC Enforcement Division, Stephanie Avakian, commented, “We continue to encourage those developing digital asset trading businesses to contact the SEC staff at FinTech@sec.gov for assistance in analyzing registration and other securities law requirements.”
With a clearer understanding of who is affected by pre-existing regulations, past ICOs will soon experience their day of reckoning. A second helping of charges is sure to be served soon.