SEC Subpoenas Crypto Companies to Route Out Fraud


The Securities and Exchange Commission papered cryptocurrency and blockchain based technology companies with subpoenas and demands for information yesterday in a widespread effort to control fundraising according to The Wall Street Journal.

The Tip of the Iceberg

There have been warning shots and talks of the coming regulations for a while but this seems like the first steps towards widespread regulatory oversight of the multi-billion dollar market for cryptocurrencies in the US.

ICO’s have already raised over $1.66 billion this year, which is on pace to top the $6.5 billion tally from last year. With that kind of investment happening regulatory bodies are going to have to get involved.

“We’re seeing the tip of the iceberg … there is going to be a ton of enforcement activity,”

Said Dan Gallager last week at an SEC conference in Washington. Gallager a former SEC commissioner who now sits on the board of a blockchain technology company called Symbiont spoke about the world of unregulated ICO being like the “the freaking Wild West—it is ‘Wolf of Wall Street’ on steroids.”

So far the cryptocurrency market has remained outside of any specific US framework for regulation. The governing bodies that be haven’t been able to pin down who should be looking at what and this confusion has carried down to the state level leaving the playing field wide open for a small number of crooks and criminals to take advantage of the lack of information in the general public.

An as yet released Massachusetts Institute of Technology study has determined that something in the range of 270 – 317 million dollars raised by ICOs have been done by fraudulent companies set up to scam people. Head of the SEC’s cyber-enforcement unit Robert Cohen said last week that at least a dozen companies have delayed their ICOs since the agency has raised questions concerning their practices.

SEC to Look Into SAFTs

Much of the SEC’s scrutiny is focused on ‘simple agreements on future tokens’ which have been issued in some of the largest fundraising cases according to industry experts. SAFT’s are generally purchased in private offerings given before the public sale of tokens to well-placed investors who can then flip the agreements even before the coin has launched.

The SEC takes notice of this practice because it sees these SAFTs as being traded like securities without conforming to any of the strict rules that already exist for that market. In the end, the WSJ which initially reported on this mass of subpoenas issued to the crypto industry had little information as to why this is happening now and what the SEC is attempting to accomplish. Except perhaps that the unregulated environment of speculation and trade in digital coins and burgeoning blockchain technology could soon be over.

Subscribe to our newsletter

Related Posts