The new crackdown on two initial silver offerings (ICOs) Paragon and AirFox by the U.S. Securities and Exchange Commission (SEC) could lead to many blockchain and crypto projects dogmatic failure in the entrance months.
As CCN reported on Nov 16, Paragon and AirFox were systematic to compensate a $350,000 fine to the U.S. SEC and reinstate investors who participated in the token sale.
The problem for the two tokens is that they have been asked by the US SEC to reinstate $12 million and $15 million respectively to investors, and since their ICOs, the prices of cryptocurrencies including Bitcoin and Ethereum have declined almost and blockchain projects have used most of their supports garnered in the token sales to account operations.
“Both companies have concluded to lapse supports to spoiled investors, register the tokens as securities, record periodic reports with the Commission, and compensate penalties,” the central SEC request read.
A more critical emanate for ICOs is that as the SEC validated in a document, investors in ICOs deliberate bonds underneath the existent guideline of the SEC have the right to sue projects to be compensated for their losses.
As such, if an financier invested in a token and available an 80 percent loss, for instance, the financier isi technically elligible to record a lawsuit opposite the initiator of the token sale to accept the supports back.
“On a date no after than sixty (60) calendar days… discharge by electronic means pretty designed to forewarn each intensity claimant, notice and a explain form, both of which shall be in a form not objected to by Commission staff, informing all persons and entities that purchased PRG intensity claims underneath Section 12 (a) of the Securities Act, including the right to sue “to redeem the care paid for such confidence with seductiveness thereon, reduction the volume of any income perceived thereon, on the proposal of such security, or for indemnification if [the purchaser] no longer owns the security.”
Upon the crackdown on Paragon and AirFox, Stephanie Avakian, the co-director of the SEC’s Enforcement Division heavily emphasized that the SEC will continue to examine token sales that have disregarded sovereign confidence laws with the vigilant of bringing down ICOs deliberate as bonds by the SEC.
“We have made it transparent that companies that emanate bonds through ICOs are compulsory to approve with existent principle and manners ruling the registration of securities. These cases tell those who are deliberation holding identical actions that we continue to be on the surveillance for violations of the sovereign bonds laws with honour to digital assets.”
US Ecosystem Should be Avoided
In the US at least, tokens and ICOs have two choices: possibly totally retard out investors from the US participating in ICOs or concur with the SEC to discharge tokens as a purebred security.
There are several regions, including South Korea, that are deliberation the legalization of ICOs to promote the expansion of the internal blockchain sector.
Past ICOs that have instituted token sales for US investors could be exposed to category movement lawsuits perfectionist payouts for the waste investors suffered via the last eleven months of the bear market, which could lead many ICOs to bankruptcy.
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