ICO Scams Come Under SEC – NY Judge
September 12, 2018 12:16 pm
A New York judge recently gave a monumental decision. He said that Initial Coin Offerings are to be considered as securities and the people who are responsible for ICO scams would face trial under the US securities laws.
The judge further said that the Securities and Exchange Commission (SEC) of the United States is authorized to carry out the legal case against the two organizers of the fraudulent ICOs. These organizers were accused of defrauding investors.
This decision is first of its kind and it has provided the SEC to track down and curb criminal cases pertaining to ICO scams and fraud incidents.
As of 2017, ICOs have become an incredibly popular way of raising funds for blockchain-based and cryptocurrency projects. ICOs are similar to IPOs, the main difference being that ICOs use cryptocurrencies while IPOs use fiat money. Where IPOs require a lot of documentation and authorizations to launch, ICOs can be initiated with minimal work.
The companies that conduct their ICO offer their cryptocurrency tokens in exchange for popular currencies like Ether and Bitcoin. The ICOs use this accumulated fund to convert cryptocurrency into fiat money. This converted money is then used to bring their product to the market.
In 2017 and 2018, there have been hundreds of ICOs which have surfaced on the market. According to a recent report, one out of two ICOs fail. Most ICOs write off the failed attempt by claiming they are hacked or shut down. This way, they take off with the investors’ money.
Given the rise in such incidents, SEC started cracking down on ICOs to protect users and investors from loss.
The judge’s ruling came as against organizers of Protostarr ICO, which was then followed by charges against PlexCorps (PlexCoin ICO) and Maksim Zaslavskiy (RECoin and DRC ICOs).
This ruling will allow prosecution of fraudulent ICOs and the people responsible for such cases.