Eighty Cryptocurrency Companies Under Subpoena by SEC as Investigation Broadens

The U.S. Securities and Exchange Commission (SEC) has launched a formal probe into the cryptocurrency market, according to information obtained by The Wall Street Journal.

Large Investigation Underway

The SEC has reportedly issued dozens of subpoenas information requests to companies and advisers involved in the cryptocurrency market. The probe could signal a shift in how the Commission evaluates the red-hot market for digital assets.

SEC Chairman Jay Clayton told a Senate panel in early February that the regulator was looking closely into cryptocurrencies, but gave no indication about whether it was probing new laws. Clayton expressed concern over whether the digital asset class is even governable under the SEC’s current framework for currency transactions.

“[W]e are open to exploring with Congress, as well as with our federal and state colleagues, whether increased federal regulation of cryptocurrency trading platforms is necessary or appropriate. We also are supportive of regulatory and policy efforts to bring clarity and fairness to this space,” Clayton said in a prepared testimony.


According to WSJ, initial coin offerings (ICOs) are at the center of the subpoenas, with regulators seeking more information about the structure of the sales.

The securities regulator has sounded the alarm bell numerous times on ICOs, a controversial crowdfunding model that has generated billions in financing for blockchain startups over the past 12 months. The SEC has warned token issuers that classifying a cryptocurrency as a “utility” token is not enough to circumvent federal securities laws.

Beyond the SEC, it remains unclear how cryptocurrencies in general and ICOs in particular will be governed. As it now stands, crypto exchanges are outside the domains of federal bodies such as the Commodity Futures Trading Commission (CFTC). Instead, they are licensed and regulated at the state level. Although the SEC is tightening its grip around ICOs, the funding model is not bound by the same rules that govern initial public offerings for stocks.

As WSJ notes, the SEC’s repeated warnings have failed to deter eager investors from participating in ICOs. The crowdfunding model has already raised about $1.7 billion this year, according to data from Token Report. At the current pace, the market will easily top last year’s tally.

Popular messaging app Telegram has already raised $850 million through a series of private sales, according to its most recent filing with the SEC. The platform plans to raise more than $2 billion through a combination of public and private sales.

It is widely believed that a huge percentage of the funds raised via ICOs has been stolen by cyber criminals. A report by Ernst & Young in January estimated that 10% of ICO funds raised last year have been stolen. A forthcoming study by MIT professor Christian Catalini is expected to show a loss of up to $317 million to fraudsters.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

The post Eighty Cryptocurrency Companies Under Subpoena by SEC as Investigation Broadens appeared first on Crypto Currency Online.

from Crypto Currency Online https://cryptocurrencyonline.co/eighty-cryptocurrency-companies-under-subpoena-by-sec-as-investigation-broadens/

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