Yesterday (Nov 14th) the U.S. Securities and Exchange Commission (SEC) released their annual enforcement report, revealing dozens of actions that the regulatory agency took against ICOs and digital assets this year.
News of these enforcement actions were not made public until the details were announced in the following Tweet:
At close of FY 2018, we brought over a dozen standalone enforcement actions involving digital assets and ICOs. https://t.co/1uQ6udWD1d— SEC_News (@SEC_News) November 14, 2018
The fine print of the report indicated that many of the ICOs in question are still ongoing and operational, which is not unusual in such cases.
Unless an investment is clearly fraudulent and criminal, the SEC will typically allow the businesses they have penalized to continue operating and generating revenue, but the balance sheets of these companies often take significant damage because a large portion of that revenue disappears due to fines.
The report states that:
When warranted, the Division has recommended enforcement actions to the Commission in matters involving ICOs. As of the close of FY 2018, the SEC had brought over a dozen stand alone enforcement actions involving digital assets and ICOs. While many of these cases have involved allegations of fraud, the Division also has pursued enforcement actions to ensure compliance with the registration requirements of the federal securities laws. In the past year, the Division has opened dozens of investigations involving ICOs and digital assets, many of which were ongoing at the close of FY 2018
Recent SEC Activity
At last week's Fintech Week Conference in D.C, William Hinman, director of Corporation Finance for the SEC, announced that the agency will finally be issuing "plain English guidance" on ICOs. After years of keeping crypto investors in the dark, the SEC has recently started imposing standard financial regulations on digital assets.
Instead of laying down guidelines for people to follow however, the agency seems to be classifying blockchain businesses in ways that they can be fined under traditional laws. While the industry has yet to see clear guidelines, it is beginning to see enforcement.
Last Thursday, the SEC announced that it had settled charges against Zachary Coburn, the founder of decentralized exchange EtherDelta. The agency claimed that the decentralized exchange "operated as an unregistered national securities exchange," a charge that left many exchanges and blockchain based projects in fear of similar action.
It is possible too that this regulatory confusion played at least some role in this week's massive sell-off in crypto markets, in which many coins lost 20% of their value or more, with bitcoin (BTC) dropping below $6,000 for the first time in several months.