The era of security tokens
A year ago, the enforcement team at the SEC would have assembled around a large table to discuss how to deal with the booming ICO market. Crypto currency start-ups had overtaken Venture Capital in fund-raising and had caught everyone off-guard.
Observers around that table would have heard stories of multi-million dollar scammers, rampant and unrealistic claims and teenagers with nothing more than a flimsy whitepaper buying brand new Lamborghinis. The “Wild West of Crypto” was turning into the O.K. Corral and in desperate need of a sheriff.
Key players around that table identified the areas that required their attention.
- Funds that raise investment using fake regulatory credentials.
- Security offerings that were masquerading as ICO utilities.
- Unregulated exchanges that were listing securities.
This challenged everything the SEC had worked so hard to preserve. Heads would have to roll.
A year on we now witness the end-game of that first phase of enforcement.
One of the first on the chopping block was Crypto Asset Management, which claimed to be “one of the first regulated crypto asset funds in the United States”. They weren’t what they claimed and were duly hit with a cease and desist order and slapped with a hefty fine. More recently the SEC made an example of two ICOs, Airfox and Paragon Coin, which were issuing securities through ICOs and failing to comply with existing statutes and rules. Finally, the founder of EtherDelta, a decentralised exchange, was charged over operating an unregistered exchange.
That was three out of three. Be warned, the SEC made it clear, we are watching and will act.
Jonathan De Carteret, CEO INDX Capital (Source: INDX Cspital)