SEC Official Slams ICOs for "Fraudulent Conduct"

This article will present the SEC's latest views on ICOs, cryptocurrencies, and blockchain technology.

The US Securities and Exchange Commission is known for making striking moves on cryptocurrency and distributed ledger technology, but recently, SEC officials have doubled down on "fraudulent conduct" attributed to Initial Coin Offerings.

SEC Official Criticizes ICOs

Two days ago in Washington, D.C., Stephanie Avakian spoke at the Securities Enforcement Forum. Avakian is the Co-Director of the SEC's Division of Enforcement, and she shares this position with Steve Peikin.

While giving a report on the SEC's recently formed cyber unit, Avakian noted that criminal activity has been aided greatly by cryptocurrencies, stating:

The work of [criminals] in many instances has been facilitated by easy access to the dark web marketplace as well as the use of digital currency, both of which make it harder to track the flow of funds involved in cyber violations.

Government officials have shown resistance to the privacy features of cryptocurrencies like Monero and ZCash, and Avakian's note only supports this stance.

Avakian also noted the SEC's stance on ICOs, stating:

[Initial Coin Offerings] are subject to the requirements of the federal securities laws, which can include the registration of securities offerings.

But, like many legitimate ways of raising capital, the popular appeal of virtual currency and blockchain technology can be an attractive vehicle for fraudulent conduct. We think that creating a permanent structure for the consideration of these issues within the Cyber Unit will ensure continued focus on protecting both investors and market integrity in this space.

In her statement, she implied that ICOs are not a "legitimate [way] of raising capital," and stated that ICOs can attract "fraudulent conduct." The SEC has given power and jurisdiction over ICOs to its recently-formed Cyber Unit, and they have exerted those powers multiple times previously.

Exerting ICO Powers

The SEC has dealt with ICOs many times before. One of their landmark decisions involved classifying The DAO's tokens as securities earlier this year, and in September they also managed to file lawsuits against two fraudulent ICOs.

In September, the SEC shut down two ICOs, both created by someone named Maksim Zaslavskiy. RECoin, the first of the two, was marketed to be a cryptocurrency staked in real estate.

The RECoin ICO allegedly published fake progress, claiming it had raised millions of dollars when the real amount was closer to $300,000.

The second ICO, named DRC (Diamond Reserve Club) was also shut down due to Zaslavskiy's lies.

Though he had claimed that he had access to lucrative deals with diamond sellers, Zaslavskiy had no investments and deals in that area. After these investigations, the SEC immediately froze Zaslavsiky's assets and took actions to stop his ICOs.

More to Come

The SEC's actions regarding those fraudulent ICOs, coupled with Avakian's comments on ICO fraud show that the SEC is ramping up efforts to monitor and control cryptocurrencies and initial coin offerings. Due to reasons like this, many ICOs are monitoring where their investors come from, and are even attempting to block users from certain countries (such as the US and China) from investing.

Hopefully in the near future, we'll be able to learn more about the SEC's plans regarding cryptocurrencies.

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Thanks for reading,
— @mooncryption

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