SEC Announces Enforcement Actions Against ICOs As Crypto Markets Tumble

John Vibes

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:

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.

Ukraine Wants to Track Cryptocurrency Transactions Above $1,200

Ukraine’s head of the Ministry of Finance, Oksana Makarova, has revealed the country is planning to start tracking cryptocurrency transactions above $1,200.

During an interview with a local news outlet, Makarova revealed the country’s strengthened anti-money laundering laws, signed last month by Ukrainian president Volodymir Zelensky, are in accordance with the latest Financial Action Task Force recommendations regarding crypto transactions.

The Ukrainian law includes crypto as an asset to be monitored, and established a threshold to trigger the scrutiny at 30,00 Ukrainian hryvnia (UAH),, equivalent to roughly $1,200. In the interview Makarova said:

If exchanges, exchangers, banks or other companies make payments in cryptocurrencies worth more than UAH 30,000 in equivalent, they must verify such transaction and collect detailed customer information.

She added that customers transacting large amounts of cryptocurrency will have to “provide comprehensive information about the origin and destination of their virtual assets.” If transactions are deemed suspicious, exchanges have to report them to the financial watchdog, the State Financial Monitoring Service (SCFM).

The SCFM, according to Makarova, can block cryptocurrency transactions and can confiscate cryptos originating from illicit transactions. She added it has “access to an analytical product that allows investigations into the origins of crypto-assets and their uses.” Makarova noted:

It is impossible to stop operations now, but it is possible to block crypto wallets and remove illegally obtained crypto assets. This can be done by accessing the crypto's private keys as a result of complex investigations.

The head of Ukraine’s Ministry of Finance also revealed several national agencies are working on regulations for virtual assets in the country, as cryptocurrencies aren’t yet defined by Ukrainian law.

She noted she believes the volume of cryptocurrency circulating in the country is “quite high,” although she believes in Ukraine “criminals and corrupt officials are quite conservative and still keep the funds mostly in cash.”

As CoinDesk reports, Makarova noted she doesn’t see the cryptocurrency industry as a threat, but sees opportunities for its development in the country.

Featured image by João Silas on Unsplash