Cryptocurrency-Based Lawsuits Have Tripled in 2018


Cryptocurrency-related lawsuits are up by approximately 300 percent this year, with roughly 45 separate cases making their way into 2018 during the first six months.


Don’t Forget to Register!

The Securities and Exchange Commission (SEC) isn’t playing nice anymore. The organization has made it clear that anyone who messes around with innocent participants and their money will pay the price, and it appears that initial coin offerings (ICOs) are at the center of the SEC’s focus. Presently, roughly 30 percent of this year’s crypto lawsuits feature the SEC going against fraudulent or unregistered ICOs.

Two of the biggest cases to occur in recent weeks are the ones against Carrier EQ (also known as AirFox) and Paragon Coin. Both companies held ICOs last year and made tons of money in the process. The suits were not about the ICOs themselves – the SEC has not accused the companies of running fraudulent schemes – but rather the lack of registration on executives’ parts.

How the Process Works

Each ICO must be registered accordingly with the SEC, granted they are securities. The process is in place to protect investors and their funds, and the SEC alleges that both companies failed to properly register with officials. Thus, Paragon Coin and Carrier EQ must do so if they are looking to continue doing business within the United States in the future. Additionally, they may be required to pay investors back, and both were slapped with $225,000 penalty fees which must be paid to the SEC.

In a recent statement, the SEC explained:

Market participants must still adhere to our well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated form or using new technologies, such as blockchain.

The SEC is clamping down on fraudulent ICOs.

We’re Watching You!

The organization also discussed some of its latest expectations for smart contracts-based decentralized exchanges, stating:

A platform that offers trading in digital asset securities and operates as an ‘exchange’ (as defined by the federal securities laws) must register with the Commission as a national securities exchange or be exempt from registration.

Will Fraud Eventually Disappear Completely?

The moves from the SEC signify massive changes in the crypto industry. For one thing, regulation is becoming much sterner, and governing organizations like the SEC are probably keeping a wider eye out for illicit or unregistered activity.

At the same time, the change is positive in the sense that fraud could likely decrease significantly as companies will, hopefully, think twice about getting caught before they step in the wrong direction.

Is the SEC right to invoke such tough regulations? Why or why not? Post your comments below.


Images courtesy of Shutterstock

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