Securities regulators have intensified their scrutiny of the nascent asset class, noting that some tokens may be considered securities, which would make their issuance, sale and trading subject to federal laws.
Thus, in the first of three separate actions announced on September 11, 2018, the Financial Industry Regulatory Authority (FINRA) accused Timothy Ayre, owner of Rocky Mountain Ayre, of committing securities fraud after he sold and marketed the digital asset HempCoin.
HempCoin was backed by shares of Rocky Mountain Ayre, but Ayre did not register the coin as a security, FINRA said. Between 2016 and 2017, investors mined more than 81 million HempCoin, which they traded on the cryptocurrency exchanges C-Cex and Yobit, according to Reuters.
On the same day, the SEC said TokenLot and its founders Lenny Kugel and Eli Lewitt agreed to pay USD 471,000 in disgorgement plus interest to settle charges that they acted as an unregistered broker-dealer for the sale of digital tokens. However, Kugel, Lewitt and TokenLot did not admit or deny the SEC’s findings.
Finally, the SEC said the hedge fund Crypto Asset Management agreed to pay a USD 200,000 penalty after it was found to have offered a fund it falsely said was regulated by the SEC when it was not. The fund and its manager Tim Enneking, who was also named in the order, neither admitted nor denied the SEC’s findings.
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