Platforms Listing IEOs Could Face Regulatory Problems

| Publish date: 05/14/2019

According to Valerie Szczepanik, the US SEC (Securities and Exchange Commission) Advisor for Digital Assets & Innovation, platforms that are looking to list IEOs (Initial Exchange Offerings) for a fee could end up facing regulatory problems.

Engaging in Broker-Dealer Activity

Szczepanik, who is also known as the SEC’s Crypto Czar, made these comments during the Consensus 2019 conference that was held on May 13. She stated that those platforms that were planning to list IEOs and attract investors for an issuer were most likely involved in broker-dealer activities.

The Crypto Czar stated that if these platforms were not registered, but had issuers or buyers who were based out of the US, or were operating in a US market, then they could end up getting into trouble with regulators in the country.

Szczepanik gave the example of TokenLot that had been launched in September last year. It was a cryptocurrency project that had been led by Eli L Lewitt and Lenny Kugel. The project had promoted itself as an Initial Coin Offering (ICO) superstore.

The SEC official stated that this platform was helping to attract buyers to ICOs, which meant that it was conducting broker-dealer activities. This led to enforcement action being taken against TokenLot. The project was charged with being as an unregistered broker-dealer as well as taking part in the distribution of tokens, which was in violation of its registration provisions.

The SEC had accused both Lewitt and Kugel of breaking the law by not registering their business in the US and conducting illegal broker-dealer activities. While TokenLot paid a fine of $471,000 for its dealings, the startup did not admit to or deny the allegations.

Regulatory Framework for Market Participants

Earlier this year in April, Szczepanik as well as her colleague, SEC Commissioner Bill Henman, developed and published a framework of regulations targeted at helping market participants identify whether a digital asset was an investment contract (read: security) or not.

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This framework was intended to serve as a guideline as well as an analytical tool that would help ICO operators and token issuers understand whether their offerings would fall under the jurisdiction of federal securities laws or not. This tool was therefore designed to help such companies stay out of regulatory trouble.

Even before this framework was published, Szczepanik had already indicated that digital assets in the fast-growing stablecoin segment of the cryptocurrency industry could face challenges under current securities laws.


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