Finance

SEC Institutes Cease And Desist Against Munchee, No Civil Penalty

SEC Institutes Cease And Desist Against Munchee, No Civil Penalty

Yet while the uninitiated may view ICOs as similar to an initial public offering of stock by a company going public, looks can be deceiving, Securities and Exchange Commission Chairman Jay Clayton warned Monday in an unusual statement on the agency's website.

"Investors should understand that to date no initial coin offerings have been registered with the SEC", Clayton said.

He also signalled that the SEC is watching crypto-cash closely, saying that "just as the SEC has a sharp focus on how USA dollar, euro and Japanese yen transactions affect our securities markets, we have the same interests and responsibilities with respect to cryptocurrencies".

SEC Chairman Jay Clayton issued a statement on cryptocurrencies and upcoming ICOs, the latter of which have attracted more than Dollars 3 billion to their coffers year-to-date.

Although Clayton doesn't outright condemn ICOs, he raises concerns about the dubious nature in which some projects manage their funding, all the while recognizing that he believes that ICOs "can be effective ways for entrepreneurs and others to raise funding, including for innovative projects". "However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require".

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So-called cryptocurrenices are increasingly in the spotlight, with Bitcoin prices soaring almost 1,600 percent this year. "Said another way, replacing a traditional corporate interest recorded in a central ledger with an enterprise interest recorded through a blockchain entry on a distributed ledger may change the form of the transaction, but it does not change the substance".

Munchee had been seeking to raise $15m to create an "ecosystem" where Munchee and others could buy and sell goods and services using the tokens.

Munchee has consented to a cease-and-desist order from the SEC and has ceased its ICO and refunded investors without admitting or denying the findings in return for the SEC taking no further action.

According to the order, in the course of the offering, the company and other promoters emphasized that investors could expect that efforts by the company and others would lead to an increase in value of the tokens. "The company also emphasised it would take steps to create and support a secondary market for the tokens". Clayton said games with semantics won't fly with the SEC. Although the SEC did not impose a civil penalty, the fact that it contacted Munchee so soon after the commencement of the token offering appears to reflect that the SEC is ramping up its token offering enforcement efforts.

The offering ran afoul of securities laws because the tokens being offered could be considered securities, the SEC says in its announcement.