SEC Cryptocurrency Enforcement Report: Analysis

A new report analyzing the SEC’s Cryptocurrency enforcement activities illustrates the regulator’s focus on Initial Coin Offerings (ICO). Notably, 70% (14/20) of SEC actions alleging unregistered securities offerings in 2021 stemmed from an ICO with 64% (9/14) alleging securities fraud against the public.

“It has become increasingly common to structure an ICO, as well as pre-sale round(s), as a private placement under Reg D”, says Todd Kulkin, Partner and Chair of the Corporate Division at Warren Law Group. “When executed properly, doing an ICO under Reg D Rule 506c, which allows companies to openly advertise private security offerings to accredited investors, accomplishes the main goals of an ICO (i.e., raising capital quickly and generating “buzz” with the public for the token) in a compliant manner and avoid SEC enforcement actions alleging fraud against the public.”

“SEC enforcement actions against a company are costly, time-consuming and can result in significant sanctions, including financial penalties. Moreover, the adverse publicity can significantly harm the company,” said David Rosenfield, a Securities Regulatory attorney at Warren Law Group. “Thus, with the SEC’s current focus on unregistered securities offerings in the ICO space, it is incumbent upon companies engaging in such offerings to be extremely careful in what they say and do, and strictly adhere to all applicable SEC rules and regulations.”

If you’re developing a cryptocurrency for an ICO, it is critical that you know the applicable regulations so you can avoid costly SEC actions against you. Seeking proper legal counsel early is the best way to accomplish your goals while being in compliance with the rules. Contact the attorneys at Warren Law Group at (866) WLGROUP or email info@warren.law to schedule your complimentary consultation today. 

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Christopher D. Warren

Christopher D. Warren, Managing Partner