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For all those still unsure about running an ICO in the US: > "The ICO is an illegal offering of securities because there is no registration filed or in effect

For all those still unsure about running an ICO in the US: > "The ICO is an illegal offering of securities because there is no registration filed or in effect with the SEC, nor is there an applicable exemption from registration," the complaint said. The complaint was filed by the SEC in Dallas and the court ordered an emergency asset freeze of the company and it's two co-founders. If you're considering an ICO, please attempt to understand your legal obligations and risks. The window of ICO free for alls looks like it's ending.

IntronExon 9y ago
It’s the SEC, there was never a window, and they’ll claw back anything and everything they feel is out of bounds. People seem to sometimes confuse the slow pace of government with a lack of inevitability, and assume there’s an opportunity. It’s not an opportunity, it’s a trap. I wouldn’t be surprised if a lot of, or all of the “legit” ICO’s are similarly removed from play.
- jhwang5 9y ago
  Not sure if they can or will claw back anything. There are simply too many offenders to individually track down, prosecute, etc. Not saying they shouldn't be punished, but there simply are too many offenders. The small time offenders will probably be let off.
  - IntronExon 9y ago
    Those offenders have helpfully immortalized their activities in an immutable public ledger. The SEC is going to have a field day, and the effort will be low. I suspect that the only measure of their interest will be total dollar amounts, beyond that... bang. I’m not sure how small you’d need to be when the nature of the activity itself produces cryptographically secure evidence of your activities. It may be that the directive to smaller ICOks will be something along the lines of, “Give it all back, now, or we’ll make you.”
  - everdev 9y ago
    True, sometimes government does an ROI on offenders and only picks off the top 10% or top 50%, but still I'd be sweating if I ran an ICO.
  - pwaai 9y ago
    Oh yes the SEC can absolutely claw back by applying laws in retrospective. Having too many offenders was never a problem for SEC. Just because you ICO'd before today doesn't mean you are safe at all, in fact I'd argue the opposite-you've opened up yourself to unknown regulatory liabilities.
    - jellicle 9y ago
      The SEC probably has about 5 employees working on ICOs, if that.
      - TeMPOraL 9y ago
        SEC's forays into ICO world caught public attention; it wouldn't surprise me if that number suddenly increased, very soon.
        IntronExon 9y ago
        I have to agree, and it’s hard to imagine the SEC turning down a bunch of easy wins. The SEC is has internal politics just like any large group.
      - Slump 9y ago
        I wouldn't be so sure. In the article linked they mention that J. Christopher Giancarlo, chairman of the Commodity Futures Trading Commission, stated "The SEC is devoting a significant portion of its resources to the ICO market..." just a few days ago.
      - PeterisP 9y ago
        There's nothing that prevents them from assigning 50 employees starting from year 2020 to mop up every ICO offered up until now. And they won't only going for the companies, but against the founders / CxOs individually - it's a poor consolation if you're not getting criminal charges because they haven't looked at your case yet, since they have quite a few years to do so.
    - CryptoPunk 9y ago
  - toomuchtodo 9y ago
    If an SEC rep sees this, I’m happy to contribute towards an effort to systemize the discovery and prosecution of ICO founders in violation of SEC regs and who are within reach of US authority (leaning on the Internet Archive and other verified data sources for e-discovery).
    - everdev 9y ago
      I wanted to get clarificaton from the SEC and contacted them here: https://www.sec.gov/forms/corp_fin_interpretive https://www.sec.gov/forms/corp_fin_interpretive Mark Vilardo ended up calling me, the same guy I read about here: https://hackernoon.com/the-sec-called-about-our-ico-i-answered-8cbbd31568ec https://hackernoon.com/the-sec-called-about-our-ico-i-answer... He was super friendly but basically left no window open for a legal ICO in the US outside of somehow ensuring that your token will never go up or down in price. EDIT: No option for a legal ICO... UNLESS you register with the SEC as a security, which is very expensive and subjects you to strict regulations.
      - deleted 9y ago
        [deleted]
      - polynomial 9y ago
        > basically left no window open for a legal ICO in the US This is at odds with Andrew Chapin's description of his call with Vilardo, where he understood him to be saying: > "the SEC recognizes that not all ICO events or token issuances are securities."[1] It seems like the SEC can't reasonably hold both positions, unless one means literally the only legal ICOs guarantee no change in token value. Having said that, it does seem like the more restricted interpretation is more in line with the Howey test. [1] https://hackernoon.com/the-sec-called-about-our-ico-i-answered-8cbbd31568ec https://hackernoon.com/the-sec-called-about-our-ico-i-answer...
        everdev 9y ago
        Agreed that publicly there are mixed messages, but based on my phone conversation, the tone was basically, "If we want to get you, we will." because the Howey test is pretty restrictive against ICOs. Additionally, they cautioned that even if the SEC passes on regulating, states have their own securities laws which can be enforced and sometimes have different rules than the Howey test. It's a legal minefield and unfortunately those brave enough to cross it and slip through will get a lot of money and those that try and get caught will get stiff penalties. It really would help to get more clarity in the SEC's public comments.
- tannhauser23 9y ago
  Exactly. I used to work in the securities regulation world and you'll be surprised at how long some investigations take - I've been involved with cases that went on for TEN years. The SEC will take the position that the vast majority of ICOs were unregistered offering of securities. Just because they don't act today, doesn't mean they're not actively investigating. And they will go after the ICO offerers.
jamiequint 9y ago
You missed the "nor is there an applicable exemption from registration" It's been well known since early-December when the SEC shut down the Munchee ICO that ICOs that function as securities will not be allowed. There are many ICOs that are still fine.
- andreygrehov 9y ago
  Correction. ICOs that function as securities and are not running under Reg D 506(c) and/or Reg S (for non-US investors) are not allowed.
boh 9y ago
ICO's aren't securities. Cyrptocurrencies aren't investment platforms. Some people are attempting to con investors into believing they are, but they do not represent equity, or legal rights of any kind. You get into trouble if you market your ICO as a security, or promise capital gains. Issuing tokens by itself is not subject to SEC scrutiny.

IntronExon 9y ago

It’s the SEC, there was never a window, and they’ll claw back anything and everything they feel is out of bounds. People seem to sometimes confuse the slow pace of government with a lack of inevitability, and assume there’s an opportunity. It’s not an opportunity, it’s a trap. I wouldn’t be surprised if a lot of, or all of the “legit” ICO’s are similarly removed from play.

jhwang5 9y ago
Not sure if they can or will claw back anything. There are simply too many offenders to individually track down, prosecute, etc. Not saying they shouldn't be punished, but there simply are too many offenders. The small time offenders will probably be let off.
- IntronExon 9y ago
  Those offenders have helpfully immortalized their activities in an immutable public ledger. The SEC is going to have a field day, and the effort will be low. I suspect that the only measure of their interest will be total dollar amounts, beyond that... bang. I’m not sure how small you’d need to be when the nature of the activity itself produces cryptographically secure evidence of your activities. It may be that the directive to smaller ICOks will be something along the lines of, “Give it all back, now, or we’ll make you.”
- everdev 9y ago
  True, sometimes government does an ROI on offenders and only picks off the top 10% or top 50%, but still I'd be sweating if I ran an ICO.
- pwaai 9y ago
  Oh yes the SEC can absolutely claw back by applying laws in retrospective. Having too many offenders was never a problem for SEC. Just because you ICO'd before today doesn't mean you are safe at all, in fact I'd argue the opposite-you've opened up yourself to unknown regulatory liabilities.
  - jellicle 9y ago
    The SEC probably has about 5 employees working on ICOs, if that.
    - TeMPOraL 9y ago
      SEC's forays into ICO world caught public attention; it wouldn't surprise me if that number suddenly increased, very soon.
      - IntronExon 9y ago
        I have to agree, and it’s hard to imagine the SEC turning down a bunch of easy wins. The SEC is has internal politics just like any large group.
    - Slump 9y ago
      I wouldn't be so sure. In the article linked they mention that J. Christopher Giancarlo, chairman of the Commodity Futures Trading Commission, stated "The SEC is devoting a significant portion of its resources to the ICO market..." just a few days ago.
    - PeterisP 9y ago
      There's nothing that prevents them from assigning 50 employees starting from year 2020 to mop up every ICO offered up until now. And they won't only going for the companies, but against the founders / CxOs individually - it's a poor consolation if you're not getting criminal charges because they haven't looked at your case yet, since they have quite a few years to do so.
  - CryptoPunk 9y ago
- toomuchtodo 9y ago
  If an SEC rep sees this, I’m happy to contribute towards an effort to systemize the discovery and prosecution of ICO founders in violation of SEC regs and who are within reach of US authority (leaning on the Internet Archive and other verified data sources for e-discovery).
  - everdev 9y ago
    I wanted to get clarificaton from the SEC and contacted them here: https://www.sec.gov/forms/corp_fin_interpretive https://www.sec.gov/forms/corp_fin_interpretive Mark Vilardo ended up calling me, the same guy I read about here: https://hackernoon.com/the-sec-called-about-our-ico-i-answered-8cbbd31568ec https://hackernoon.com/the-sec-called-about-our-ico-i-answer... He was super friendly but basically left no window open for a legal ICO in the US outside of somehow ensuring that your token will never go up or down in price. EDIT: No option for a legal ICO... UNLESS you register with the SEC as a security, which is very expensive and subjects you to strict regulations.
    - deleted 9y ago
      [deleted]
    - polynomial 9y ago
      > basically left no window open for a legal ICO in the US This is at odds with Andrew Chapin's description of his call with Vilardo, where he understood him to be saying: > "the SEC recognizes that not all ICO events or token issuances are securities."[1] It seems like the SEC can't reasonably hold both positions, unless one means literally the only legal ICOs guarantee no change in token value. Having said that, it does seem like the more restricted interpretation is more in line with the Howey test. [1] https://hackernoon.com/the-sec-called-about-our-ico-i-answered-8cbbd31568ec https://hackernoon.com/the-sec-called-about-our-ico-i-answer...
      - everdev 9y ago
        Agreed that publicly there are mixed messages, but based on my phone conversation, the tone was basically, "If we want to get you, we will." because the Howey test is pretty restrictive against ICOs. Additionally, they cautioned that even if the SEC passes on regulating, states have their own securities laws which can be enforced and sometimes have different rules than the Howey test. It's a legal minefield and unfortunately those brave enough to cross it and slip through will get a lot of money and those that try and get caught will get stiff penalties. It really would help to get more clarity in the SEC's public comments.
tannhauser23 9y ago
Exactly. I used to work in the securities regulation world and you'll be surprised at how long some investigations take - I've been involved with cases that went on for TEN years. The SEC will take the position that the vast majority of ICOs were unregistered offering of securities. Just because they don't act today, doesn't mean they're not actively investigating. And they will go after the ICO offerers.

jamiequint 9y ago

You missed the "nor is there an applicable exemption from registration" It's been well known since early-December when the SEC shut down the Munchee ICO that ICOs that function as securities will not be allowed. There are many ICOs that are still fine.

andreygrehov 9y ago
Correction. ICOs that function as securities and are not running under Reg D 506(c) and/or Reg S (for non-US investors) are not allowed.

boh 9y ago

ICO's aren't securities. Cyrptocurrencies aren't investment platforms. Some people are attempting to con investors into believing they are, but they do not represent equity, or legal rights of any kind. You get into trouble if you market your ICO as a security, or promise capital gains. Issuing tokens by itself is not subject to SEC scrutiny.