Blockheads changing company names to surf crypto wave get a warning from the SEC

Regulator tells lawyers told to get off the fence or face unpleasant fall

By Simon Sharwood, APAC Editor

Posted in Emergent Tech, 23rd January 2018 03:56 GMT

The chairman of the United States’ Securities and Exchange Commission has again taken aim at cryptocurrency speculators, this time warning companies thinking of adding “Blockchain” to their names that his agency is watching them. Closely.

In remarks delivered at the Securities Regulation Institute, SEC Chair Jay Clayton said “I doubt anyone in this audience thinks it would be acceptable for a public company with no meaningful track record in pursuing the commercialization of distributed ledger or blockchain technology to (1) start to dabble in blockchain activities, (2) change its name to something like "Blockchain-R-Us," and (3) immediately offer securities, without providing adequate disclosure to Main Street investors about those changes and the risks involved.”

Those words were a reference to the likes of Stapleton Capital, Long Island Iced Tea and UK company On-Line, all of which added a bit of Blockchain to their names and saw their share prices soar.

The next company to ponder such a change may have to think again, as Clayton said “The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering.”

Clayton also had some choice words for professionals advising cryptocurrency concerns.

“My … message is simple and a bit stern,” he said. “Market professionals, especially gatekeepers, need to act responsibly and hold themselves to high standards. To be blunt, from what I have seen recently, particularly in the initial coin offering ("ICO") space, they can do better.”

The chair said he’s seen “initial coin offerings (ICOs) where the lawyers involved appear to be, on the one hand, assisting promoters in structuring offerings of products that have many of the key features of a securities offering, but call it an ‘ICO,’ which sounds pretty close to an ‘IPO’." An IPO must follow many government regulations, while ICOs scoff at such niceties. Clayton said he’s seen lawyers equivocate about whether an ICO is really an IPO, because the client doesn’t mind the risk that their ICO could be pinged.

Clayton gave such operators a warning: “I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the U.S. securities bar,” he said.

The SEC’s previously issued similarly-sternly-worded guidance to crypto speculators and binned an ICO for restaurant app Munchee. The US Commodity Futures Trading Commission (CFTC) has also acted, filing fraud charges against companies it feels ripped off hot-to-trot crypto investors. ®

Sign up to our NewsletterGet IT in your inbox daily

25 Comments

More from The Register

Good lord, Kodak's stock is up 120 per cent. How? New film? Oh. It launched a crypto-coin

Sigh, 2018. Sigh

Kodak teases smartphone

Facebook invents new unit of time to measure modern attention spans: 1/705,600,000 of a sec

FB VR devs invite you to flick the screen rate

Facebook: Who needs millennials? The cops love us more than ever!

Social network says police, government requests for data and takedowns booming

Facebook's send-us-your-nudes service is coming to UK, America

Pre-emptive perv to defang revenge pr0nz peddlers

You'll like this: Facebook probed by US watchdog amid privacy storm

'Non-public' FTC investigation a new headache for Zuckerberg

Facebook want us to believe banning Putin's troll army safeguards Russian democracy

Stop laughing, this is serious: Zuck’s also decided only Europeans deserve GDPR-grade data protection

Rudd-y hell, dark web! Amber alert! UK Home Sec is on the war path for stealthy cyber-crims

Hashtag game over crooks question mark question mark

Schrems' Facebook case edges closer to ruling over EU-US data flows

Irish court issues questions to top Euro judges in long-running scrap between privacy activist and Facebook

SEC's cyber-cops cyber-file cyber-first cyber-fraud cyber-charges

Securities watchdog puts the freeze on dodgy ICO