On September 11, the SEC announced a pair of settled cryptocurrency enforcement actions. The first was against an unregistered digital-asset hedge fund. The second shut down an “ICO Superstore” as an unregistered broker-dealer.
Crypto Asset Management LP (“CAM”) ran an unregistered investment company while falsely marketing it as the “first regulated crypto asset fund in the United States.” The unregistered offering raised $3.6 million over four months in late 2017, violating the ’33 Act. Because the offering proceeds were used to buy digital assets that constituted over 40% of CAM’s total assets, it also an unregistered investment company.
The La Jolla, California company and its principal halted the offering when contacted by the Commission Staff. After making rescission offers to investors, the company corrected its disclosures and resumed activity through a Reg. D offering.
The OIP charged violations of the ’33 Act, the Investment Company Act and Advisers Act (both 1940 Acts), imposed cease and desist orders and $200,000 civil penalty.
In the Matter of Crypto Asset Management, LP, et al, No. 33-10544 (SEC Sept. 11, 2018), is here: https://www.sec.gov/litigation/admin/2018/33-10544.pdf
TokenLot, LLC involved an “ICO Superstore” and its owners ran a website offering over 200 different digital tokens (some constituting “securities”) and offered transaction facilities for ICOs and secondary-market token trading. The OIP charged violations of the registration provisions of both the ’33 Act (selling unregistered securities, through the ICOs) and ’34 Act (acting as an unregistered broker-dealer in connection with the secondary market trading).
Settling the action, the Respondents consented to the Order, agreed to an independent party to continue winding down the company, $471,000 in disgorgement and individual civil penalties with industry bars.
In the Matter of TokenLot, LLC, et al., No. 34-33221 (SEC Sept. 11, 2018), is here: https://www.sec.gov/litigation/admin/2018/33-10543.pdf
Thomas K. Potter, III (email@example.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas and Louisiana. He has over 32 years’ experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile. © 2018 by Thomas K. Potter, III (all rights reserved).