The SEC enforcement process

The winter is here

Throughout the summer of 2017, it was a common practice for an ICO team to take the position that its tokens are not securities. At Crypto Lawyers Corporation we meet with this belief on a daily basis. It is very important for the developers of such projects to understand the risks related to holding this position as well as to be fully aware of the long and painful investigation process that SEC agents are performing once the project falls under their radar.

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The ‘SEC vs DAO’ case has officially announced that the ICO industry is now in the spotlight and that SEC will be regulating the space on a case by case level developing a new portfolio of precedents. Such attention leads the market to the development of the SEC-compliant ICO industry and the utility tokens are evolving into the tokenized securities. Crypto Lawyers Corporation is aiming to focus primarily on the SEC-compliant tokenized securities cases in 2018. Feel free to connect with us via a free Skype consultation if you’re interested to discuss your project.

The investigation is just the beginning

An expansive paperwork and the examination of the documents

SEC will never provide an immediate opinion after a summary investigation. One should not deprecate the level of complexity with which the agency is performing the investigation. It is quite normal for an investigation to run for months, often times stretching for over a year, as the process requires the preparation and analysis of the vast amounts of documents, numerous witness interviews. At the pinnacle of the process are the extended negotiations about charges and potential settlements.

Dissecting of every comment

The investigation period is needed in order for the SEC to gather facts and determine if a violation of the securities laws is taking place. From here, they decide whether to file an enforcement action. Following the DAO example, it should be clear that the SEC is able to go through the great efforts to dive deeply into the anatomy of the project and all of the aspects of the relevant conduct, examining closely every comment made by an ICO team before taking its final position.

The verdict

At the end of an investigation, the SEC may choose to bring a formal enforcement action. There are two options here: (1)  an in-house administrative proceeding or (2) a civil lawsuit in federal court. Preparations for a formal hearing in front of a judge or jury may require additional rounds of document production, depositions as well as motions practice.

The trial

At last, several years into the process and after the conduct at issue, once all of the preparations are made and are taken into consideration, the case is decided at a hearing or trial.

Triple check if your ICO is SEC-compliant

In the end, we would like to summarize all of the above by asking every founder to consult with the professional lawyers before performing any crowdfunding actions. Save yourself several years worth of hustle. Crypto Lawyers Corporation provides free Skype consultations to the startup founders. Make sure to apply on the main page when you’re ready.


About Crypto Lawyers Corporation

This blog was created in order to educate the Crypto Lawyers Corporation clients and partners about the developing world of ICO campaigns, be an introduction to the world of Blockchain, the latest industry updates and share our professional experience. However, none of the materials in this blog should be regarded as legal or investment advice.