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The United States Securities and Exchange Commission (SEC) on Friday initiated administrative proceedings against American CryptoFed, a Wyoming-based decentralized autonomous organization (DAO).
The regulator wants to “determine whether a stop order should be issued to suspend the registration of the offer and sale of two crypto assets, the Ducat token and the Locke token,” the SEC announced in A declaration released on Friday.
Ducat token is an algorithmic stablecoin while Locke is a government token created by American CryptoFed.
The action by the US securities regulator comes more than a year after American CryptoFed filed an S-1 registration form with the Commission. Form S-1 is an initial registration required of companies wishing to offer new securities to the public. American CryptoFed also filed a Form 10 registration to register the tokens as equity securities. However, the SEC rejected the records.
In November last year, the regulator halted registration of the two tokens, alleging that the DAO had failed to provide information on its “business, management and financial terms”. This included audited financial statements.
The company’s filing “also contained materially misleading statements and omissions, including inconsistent statements as to whether the tokens are securities,” the regulator said. In the same month, the regulator issued an order review to determine whether a stop order should be issued against the DAO record.
However, in Friday’s statement, the SEC alleged that the US-based CryptoFed failed to cooperate with the review of its registration statement. Anyway, Marian Orr, CEO of the company, said CoinDesk last year that she refuted “point by point” the criticisms raised by the regulator.
RECENT DEVELOPMENTS
According a recent SEC filing, American CryptoFed in May 2022 wrote to the Commission that it would proceed with issuing the tokens in July 2022. But in June, the company instead filed a request to withdraw its registration with the Commission. The SEC said it denied the request on the grounds that “granting the withdrawal request is not consistent with the public interest and the protection of investors.”
In the new SEC statement, David Hirsch, head of the Enforcement Division’s Crypto Assets and Cyber Unit, noted that an issuer who wishes to offer crypto-assets as securities transactions “must provide the SEC Required Disclosure Information”.
“American CryptoFed not only failed to comply with the disclosure requirements of federal securities laws, but it also claimed that the securities transactions they seek to record are in fact not securities transactions at all” , Hirsch said.
Are cryptocurrencies securities?
In 2018, Jay Clayton, the former SEC Chairman, noted that most cryptocurrency products are considered securities and should be registered with the Commission as such. Last August, Gary Gensler, current chairman of the SEC, echoes the same thoughtnoting that the securities regulator counts many cryptocurrency coins and tokens as securities.
Because of this disposition towards digital assets, the SEC has waged war on crypto startups offering crypto offerings without registering them as securities.
These battles include those the regulator has fought or is fighting against creators such as Kik Interactive which has raised nearly $100 million through the sale of its “Kin” digital tokens, digital asset lender BlockFi Lendingthat offers remunerated accounts, and Ripple Labs which has raised over $1 billion from sales of its XRP token, all without registering them as securities.
With US President Joe Biden recent executive order calling for smooth regulation of the emerging cryptocurrency industry, it remains to be seen what final direction the world’s largest economy will take when it comes to cryptocurrency regulation.
The United States Securities and Exchange Commission (SEC) on Friday initiated administrative proceedings against American CryptoFed, a Wyoming-based decentralized autonomous organization (DAO).
The regulator wants to “determine whether a stop order should be issued to suspend the registration of the offer and sale of two crypto assets, the Ducat token and the Locke token,” the SEC announced in A declaration published on Friday.
Ducat token is an algorithmic stablecoin while Locke is a government token created by American CryptoFed.
The action by the US securities regulator comes more than a year after American CryptoFed filed an S-1 registration form with the Commission. Form S-1 is an initial registration required of companies wishing to offer new securities to the public. American CryptoFed also filed a Form 10 registration to register the tokens as equity securities. However, the SEC rejected the records.
In November last year, the regulator halted registration of the two tokens, alleging that the DAO had failed to provide information on its “business, management and financial terms”. This included audited financial statements.
The company’s filing “also contained materially misleading statements and omissions, including inconsistent statements as to whether the tokens are securities,” the regulator said. In the same month, the regulator issued an order review to determine whether a stop order should be issued against the DAO record.
However, in Friday’s statement, the SEC alleged that the US-based CryptoFed failed to cooperate with the review of its registration statement. Anyway, Marian Orr, CEO of the company, said CoinDesk last year that she refuted “point by point” the criticisms raised by the regulator.
RECENT DEVELOPMENTS
According a recent SEC filing, American CryptoFed in May 2022 wrote to the Commission that it would proceed with issuing the tokens in July 2022. But in June, the company instead filed a request to withdraw its registration with the Commission. The SEC said it denied the request on the grounds that “granting the withdrawal request is not consistent with the public interest and the protection of investors.”
In the new SEC statement, David Hirsch, head of the Enforcement Division’s Crypto Assets and Cyber Unit, noted that an issuer who wishes to offer crypto-assets as securities transactions “must provide the SEC Required Disclosure Information”.
“American CryptoFed not only failed to comply with the disclosure requirements of federal securities laws, but it also claimed that the securities transactions they seek to record are in fact not securities transactions at all” , Hirsch said.
Are cryptocurrencies securities?
In 2018, Jay Clayton, the former SEC Chairman, noted that most cryptocurrency products are considered securities and should be registered with the Commission as such. Last August, Gary Gensler, current chairman of the SEC, echoes the same thoughtnoting that the securities regulator counts many cryptocurrency coins and tokens as securities.
Because of this provision for digital assets, the SEC has waged war on crypto startups offering crypto offerings without registering them as securities.
These battles include those the regulator has fought or is fighting against creators such as Kik Interactive which has raised nearly $100 million through the sale of its “Kin” digital tokens, digital asset lender BlockFi Lendingthat offers remunerated accounts, and Ripple Labs which has raised over $1 billion from sales of its XRP token, all without registering them as securities.
With US President Joe Biden recent executive order calling for smooth regulation of the emerging cryptocurrency industry, it remains to be seen what final direction the world’s largest economy will take when it comes to cryptocurrency regulation.
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