The SEC was successful this week in two enforcement settlements. It obtained an order from a federal court in Texas requiring the former CEO and COO of AriseBank to pay $2.7 million to settle registration and anti-fraud violations. The case arose from the ICO of AriseCoin, where AriseBank executives falsely claimed their company was a first-of-its-kind decentralized bank offering a variety of cryptocurrency-related services. As part of the settlement, the executives agreed to an Officer and Director bar. The former CEO was criminally charged for the same conduct shortly before the settlement was finalized. In another settlement, CoinAlpha Advisors LLC (CoinAlpha) settled registration violation charges when it agreed to return $600,000 raised from 22 investors from several U.S. states. The SEC alleged that CoinAlpha engaged in a general solicitation of unregistered securities and took no reasonable steps to ensure only accredited investors purchased interests in its fund.
Also this week, in a class action alleging sales of unregistered securities related to an ICO, a district court denied the defendants' motion to dismiss, finding the defendants were unable to demonstrate that the tokens subject to the lawsuit were not "investment contracts" subject to SEC registration requirements. In a voluntary action, a well-funded startup, Basis, announced that it would return its funding to investors and cancel its project to build a stablecoin that would maintain a stable price based on algorithmic functions. As reported by Forbes, Basis decided to cancel the project after a meeting with the SEC left the company and its lawyers believing that the proposed stablecoins would be deemed unregistered securities. In another item of note this week, the CFTC published a request for information seeking public comment and feedback on the underlying technology, opportunities, mechanics, use cases and markets related to Eether and the Ethereum Network to benefit its LabCFTC, created in May 2018.
In international news, a new report was published last week by the Financial Action Task Force (FATF) that evaluated anti-money laundering and counter-terrorist financing (AML/CFT) measures in place in the United Kingdom. The report pointed out that "virtual currency exchange providers are not yet covered by AML/CFT requirements" and cited this as an "emerging risk." The report also stated that "there is not yet evidence to suggest that broad scale ML/TF is occurring in the UK through this relatively small sector." According to another recent report, Denmark has identified 2,700 individuals that it claims owe substantial taxes on bitcoin profits from 2015 to 2017. Meanwhile, New Zealand has blacklisted three more cryptocurrency platforms as scams. Harking back to the days of Mt. Gox, prosecutors in Japan are seeking a 10-year prison sentence for Mark Karpeles, who they claim stole $3 million from customer accounts in late 2013, months before the exchange collapsed in the wake of a hack. In a recent cybersecurity incident, hackers reportedly have set in motion a massive campaign that scans for internet-exposed Ethereum wallets and mining equipment, stealing the ether. Finally, a Dec. 12 blog post from the University of Oxford noted that an interesting precedent may have been set in a recent Canadian court case, where the court ordered a substantial amount of ether to be returned to the plaintiff after the plaintiff demonstrated, using blockchain analysis, that the ether had been transferred in error.
For more information, please check out the following links:
- Executives Settle ICO Scam Charges
- ICO Cease and Desist Order: COINALPHA ADVISORS LLC
- Can't Duck Claims $17M 'Tokens' Were Unregistered Stock
- CFTC Seeks Public Comments on Crypto-asset Mechanics and Markets
- UK: Anti-money laundering and counter-terrorist financing measures
- UK Crypto Exchanges Pose Low Money Laundering Risk, Says Global Watchdog
- Financial Action Task Force Urges UK to Improve AML Activities in Cryptocurrency Sector
- Denmark Targets 2,700 Bitcoin Traders for Tax Payments After Tip-Off From Finland
- New Zealand: Financial Authority Blacklists Another Three Crypto Platforms Marked as 'Suspected Scams'
- Report: Court Ruling to Return Mistakenly Sent Cryptocurrency Could Set Precedent
- 10-Year Jail Term Sought for Former Mt Gox CEO Mark Karpeles
- Hackers ramp up attacks on mining rigs before Ethereum price crashes into the gutter
- Crypto's Top Funded Startup Shutters Operations Following SEC Concerns
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