The US Securities and Exchange Commission

Filecoin Offering: Community Alleges Token Dumping, Tron’s Justin Sun Wants the US SEC to Investigate

17/10/2020 by Idelto Editor

The recent Filecoin (FIL) token offering is creating controversy as some crypto community members are alleging that an unknown account has received 1.5 million tokens when only 500,000 were due for unlocking. According to reports, 800,000 tokens out of the 1.5 million of such tokens have been transferred to Huobi and other exchanges.

Filecoin Denial

According to a Chinese language website, 8btc.com, an unidentified Filecoin representative insisted the decision was made to help stabilize the price in the period after listing.

The representative reportedly said:

It is to establish an independent market maker to (help) maintain a stable price in the early stage of the project, because the price may be the most unstable at this time. At the same time, these coins are not a sell-off of FIL by the Filecoin.

As part of the plan, FIL tokens were also sent to other exchanges besides Huobi. Meanwhile, the Filecoin team also explained in a blog that “the network has now entered a quiet post-launch monitoring period to ensure the network is operating smoothly.” The blog adds that the “network is stable and community members are reporting successful operations.”

Token Price Tanks

Despite this plan, the Filecoin token saw its price tank a few hours after listing. It seems the envisaged stabilizing strategy failed to stop the token price from dropping. As Binance trading data shows, the token opened at $200 but this had dropped to $42 at the time of writing. It is this sharp drop from the opening price that has prompted complaints and allegations of impropriety.

One notable critic of the FIL offering is controversial Justin Sun who is insinuating that one Juan Benet and others at Filecoin had exit scammed. Tron tweets:

“Exit scam here? 1.5 million $FIL for 200 USD each worth 300 million USD at the high. Now (the) price is below 60 USD. 70% down. No lock-up. No announcement to the community. How much do you sell? Is this ok?”

Sun, who has faced almost similar allegations, goes on to encourage investors, especially those from the United States “to make sure Filecoin and Juan Benet are held responsible for this (dumping) under the protection of the US Securities and Exchange Commission.” Some Twitter users appeared to agree with Sun while some were quick to remind him of his own past misdeeds.

Still, in a later tweet, an undeterred Sun doubles down on his claims that FIL devs had disregarded the rules by dumping 1.5 million tokens.

Counterfeit FIL Tokens

Meanwhile, in another twist to the controversy, reports also emerged on October 16 that scammers may have forged FIL tokens.

According to the Beijing-based Chainsmap monitoring system, these tokens were created a day before the offering while their transfer to addresses had been carried out by way of airdrops. In addition, a transaction pair pool has been established in Uniswap with this token.

Launched as a decentralized storage network, the Filecoin team says the project was started to help “store humanity’s most important information.” The project raised $205 million in an initial coin offering in 2017, and while the launch date was initially planned for mid-2019. However, the mainnet launch date was pushed back until block 148,888, which is expected in mid-October 2020.

What are your views about the Filecoin dumping allegations? Tell us what you think in the comments section below.

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Grayscale’s Ethereum Trust Attains SEC Reporting Company Status

13/10/2020 by Idelto Editor

Grayscale Investments says the registration statement on Form 10 that it filed with the U.S. Securities and Exchange Commission (SEC) on behalf of the Ethereum Trust has become effective. This means Ethereum Trust is now an official SEC reporting company and the second digital currency investment product to achieve the milestone.

Grayscale’s BTC Trust (GBTC) is the first investment product to attain the status after its filing became effective on January 21 of 2020. An organization becomes a SEC reporting company or public company upon “registration pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the Exchange Act).”

Consequently, the Grayscale Ethereum Trust will now “file its quarterly and annual reports, including its financial statements, on Form 10-Qs and 10-Ks with the SEC, along with current reports on Form 8-K, in addition to complying with all other obligations under the Exchange Act.”

Still, the world’s largest digital currency asset manager elaborates that “this voluntary filing should not be confused as an effort to classify Grayscale Ethereum Trust as an exchange-traded fund (ETF). The structure of the Trust will not change and it will continue to not operate a redemption program nor trade on a national securities exchange.”

Meanwhile, the statement released by Grayscale Investments also explains that “the shares of the Trust are designed to provide investors with a cost-effective and convenient way to gain investment exposure to ETH.”

Nevertheless, the statement still highlights some important information about the shares:

The Ethereum Trust will offer a private placement to accredited investors. The investment objective of the Trust is for the Shares (based on ETH per Share) to reflect the value of ETH held by the Trust, determined by reference to the Index Price (as defined in the Information Statement), less the Trust’s expenses and other liabilities.

The statement clarifies that Grayscale is yet to meet “its investment objective and the Shares quoted on OTCQX have not reflected the value of ETH held by the Trust, less the Trust’s expenses and other liabilities.” Instead, the shares have “traded at a substantial premium over such value.”

The latest announcement by Grayscale, which tops the list of publicly listed companies that hold bitcoin, comes as U.S. regulators and statutory bodies are increasing pressure on cryptocurrency businesses that are not adhering to the Securities Act.

What does the attainment of the reporting company status by the Ethereum Trust mean for other altcoins? Tell us what you think in the comments section below?

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SEC Commissioner Peirce Weighs in Defi Token Regulation Debate: Panel Predicts Defi Will Self Correct in Twelve Months

09/10/2020 by Idelto Editor

The U.S. Securities and Exchange Commissioner, Hester Peirce says while defi tokens carry some equity-like benefits, she believes that giving something away is distinct from selling something. As a result of this lack of clarity, Peirce says questions about the regulatory structure and how these tokens could affect corporate governance will continue to linger.

Speaking at the LA Blockchain Summit, the Commissioner’s remarks, which Peirce says represent her personal views, were made in response to the question of treating governance tokens that are used by many decentralized finance (defi) platforms as securities.

Instead, Peirce suggests that “people should come to talk to the SEC about how they intend to distribute tokens” although she cautions that “there are other people on the commission who might look at the same facts and circumstances differently than I do.”

Indeed, over the course of the year, U.S. regulators, including the SEC have pursued individuals and entities that were involved in raising funds via ICOs within the United States jurisdiction.

Citing Section 5(a) and 5(c) of the U.S. Securities Act, the regulators have charged many such individuals and entities, including gaming platform Unikrn, for alleged securities regulations violations that related ICOs of 2017. In Unikrn’s case, however, Peirce publicly dissented to the $6.1 million fine, saying this sends the wrong message to innovators.

Instead of imposing stiff fines, the “Crypto Mom”, as Peirce is affectionately known in crypto circles, prefers what she terms the “safe harbour” approach. Under this plan, cryptocurrency companies will be given three years to devolve power to their communities before the SEC takes action for the alleged violations of the securities laws.

Still, Peirce’s favourable stance on cryptos has not stopped the SEC from reportedly hinting that airdrops— which very are common in the defi space— could be seen as security offerings. That hint, together with growing concerns about the number of scams as well as a lack of regulation in the space, could see regulators pouncing on defi.

However, the recent Finder’s Cryptocurrency Predictions Report finds that the majority of the panelled experts believe the defi industry will self-correct in the next twelve months. For instance, in remarks obtained during the survey, one panellist, Jason Lau COO at Okcoin, told interviewers that “the longer-term outlook for defi is positive but says there will be many bumps in the road.”

Lau’s sentiments are also echoed by Gavin Smith, the managing partner at Panxora defi Hedge Fund, who says “the protocols are still in their infancy and have huge potential moving forward.” Meanwhile, the report found that 64% of the panellists actually expect Defi to grow “in both value locked and user count over the next 12 months.”

Still, about 13% of the panellists disagree, and instead, they believe Defi could be headed for troubled times. One such panellist sharing this particularly pessimistic outlook is Coinmama CEO Sagi Bakshi who says he “thinks defi is growing too fast in an irresponsible and unregulated manner.”

The survey report quotes Bakshi saying:

It will implode with a huge loss of users’ funds, something like Mt. Gox.

Although the majority of the panellists are optimistic about the future of Defi, they “also all concede there are barriers to growth.” The report states that “some 73% say scams, excessive hype and market manipulation will challenge defi growth.”

Half say general cryptocurrency frictions — such as private key management and price volatility — will make it harder for defi to grow, while 43% say a lack of public awareness is a major obstacle. Just over a quarter of panellists (27%) say defi has a lack of genuine value and real-world applications, which will make it harder for further adoption.

Will the Crypto Mom’s safe harbour proposal win more SEC support? Tell us what you think in the comments section below.

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US Regulator Charges Tech Firm, CEO in $5 Million ICO Fraud Case

17/08/2020 by Idelto Editor

The United States Securities and Exchange Commission (SEC) jointly charged Virginia-based Boontech and CEO, Rajesh Pavithran for fraud and registration violations. The charges stem from an initial coin offering (ICO) that raised $5 million from 1,500 investors around the world in exchange for Boon Coins.

In return, Pavithran and his company promised to develop and market a platform that connects employers posting jobs with freelancers seeking work. The SEC says that the alleged offenses were committed between November 2017 and January 2018.

According to the SEC order, “Boon Coins were offered and sold as investment contracts and were, therefore securities.” The order states that both Boontech and Pavithran failed to register the offering.

Furthermore, the order finds that Pavithran and Boontech made “false and misleading statements, including claims that Boon Coins were stable and secure.”

According to the SEC, Pavithran and Boontech also claimed that “their platform eliminated volatility inherent in the digital asset markets by using patent-pending technology to hedge Boon Coins against the U.S. dollar, when in fact Boontech had no such patent-pending technology.”

The US regulator also deemed Boontech’s claims that its platform “was faster and more scalable than its competitors because it was built on Boontech’s blockchain” as another representation.

Instead, the SEC determined that “the platform was being developed on the same public blockchain as its competitors.”

In a statement, Chief of the SEC Enforcement Division’s Cyber Unit, Kristina Littman said:

“Investors are entitled to truthful disclosures from issuers of securities, whether digital or otherwise. Pavithran and Boontech defrauded investors by convincing them to fund this endeavor based on the allure of innovation that simply did not exist.”

According to the SEC, Pavithran and the tech company violated the antifraud and registration provisions of the federal securities laws.

Meanwhile, the SEC order reveals that both Boontech and Pavithran, “agreed to settle the charges by consenting to the issuance of the order.”

Consequently, Boontech is now required “to disgorge the $5 million raised in the ICO plus prejudgment interest of $600,334.”

The order requires Pavithran to pay a penalty of $150,000 and bars him from serving as an officer or director of a public company.

Finally, Boontech and Pavithran must destroy all Boon Coins in their possession and issue requests to remove Boon Coins from any further trading on all third-party digital asset trading platforms.

The order also bars the duo from participating in any future offerings of digital asset securities.

What do you think of the charges against Boontech? Share your thoughts in the comments section below.

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