The stunning growth of digital coins has led many developers and investors to launch Initial Coin Offerings. These ICOs fetch massive amounts of capital in short time periods, but many fail to meet even the most basic legal requirements. As one former SEC regulator put it, “I.C.O.s represent the most pervasive, open and notorious violation of federal securities laws" in recent years. The Securities and Exchange Commission has issued multiple warnings about Initial Coin Offerings that do not comply with securities laws and is increasingly taking action against unregistered and fraudulent ICOs.
Any coin that markets itself as a chance to profit meets the definition of a security and must be registered. Nonetheless, developers who launch ICOs are often under the impression that because they refer to their project as a “utility token,” they are not subject to securities laws. This is a delusion, and the SEC has declared that such offerings are subject to securities regulations.
Developers promoting ICOs often deceive investors about their digital tokens with trumped up boasts about cutting edge functions and promising business partnerships. For example, the SEC has seized over $20 million in digital assets from Titanium Blockchain Infrastructure Services and charged its founder with securities fraud after he "deceived investors with purely fictional claims of business prospects" with Paypal and Disney.
Since the passage of Dodd-Frank in 2010, the SEC has been rewarding those who come forward to report original information of securities violations. Reporting cryptocurrency fraud allows the SEC to protect investors, and whistleblowers may be handsomely rewarded for their vital efforts. If you have original information of ICO fraud or a cryptocurrency-related securities violation, we would like to hear your story and assess your case. Contact us today for a free evaluation with an experienced SEC whistleblower attorney.
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