Wall Street's primary regulator cautioned Wednesday (Nov 1) that stars or other people might be breaking up US securities legislation when promoting investments in first sheet offerings (ICOs), a way for organizations to raise money on the internet. ICOs have become an increasingly popular fundraising mechanism for young tech businesses, allowing them to quickly raise tens of thousands of dollars by creating and selling electronic coins online such as bitcoin with little regulatory oversight.
Over the last couple of months some projects have received endorsements on social websites by celebrities including hotel heiress Paris Hilton, boxer Floyd Mayweather and rapper The Game. But the US Securities and Exchange Commission explained that exemptions may be unlawful if the coins are thought of securities and the actors do not "disclose the nature, scope, and amount of reimbursement received in exchange for your promotion.
A failure to disclose that this info is a breach of the anti-touting terms and conditions of the federal securities laws, the SEC's Enforcement Division and Office of Compliance Inspections and Examinations said in a joint statement. Promoters may also be accountable for potential violations of anti fraud rules and also for acting as unregistered agents, the statement included.
The SEC will continue to concentrate on these kinds of promotions to protect investors and to guarantee compliance with the securities legislation, the SEC stated. The SEC's note is the most recent warning by a global financial regulator on ICOs, which may make companies and people involved in the fundraising schemes more cautious.
In July the SEC explained that some of the coins could be considered securities subject to federal rules and obligations. The evaluation also involves analyzing the reasonable anticipation of participants at ICOs. Government in Switzerland, Britain and Malaysia also have issued warnings on the dangers connected with ICOs, while regulators in China and South Korea have prohibited them.