This article looks at how the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) have pursued cases involving cryptocurrencies. A number of prosecutions have been brought against defendants who misled investors into believing that they were obtaining cryptocurrencies when in fact there were simply false statements and schemes to defraud, such as Ponzi schemes. When a company has attempted to issue a cryptocurrency to investors, the SEC has relied on Section 5(a) and 5(c) of the Securities Act of 1933 to require that issuers file a registration statement with the Commission. This is not an easy process and requires extensive disclosures that issuers of cryptocurrencies have found confounding. One possible way around those restrictions is if an issuer relies on Regulation D or Regulation A+ to issue the cryptocurrency. However, this route is risky because it may require approval by the SEC before proceeding. Will we see broader issuance of cryptocurrencies? The short answer is “no” because the SEC, apart from Commissioner Hester Peirce, has shown a distinct hostility toward companies trying to issue cryptocurrencies. Is there a way around this? Perhaps, if a firm is willing to follow all the rules for a Regulation D or Regulation A+ offering it might be possible, but no one should be holding their breath for the SEC to approve the issuance of a cryptocurrency.
Peter J. Henning,
A TAXONOMY OF CRYPTOCURRENCY ENFORCEMENT ACTIONS,
14 Brook. J. Corp. Fin. & Com. L.
Available at: https://brooklynworks.brooklaw.edu/bjcfcl/vol14/iss2/2
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