Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Cryptocurrency investing chart and coins

Portfolio > Alternative Investments > Cryptocurrencies

SEC Orders Public Proceedings Over ‘Misleading’ Crypto Offerings

Your article was successfully shared with the contacts you provided.

The Securities and Exchange Commission instituted administrative proceedings against Wyoming-based American CryptoFed DAO to determine whether a stop order should be issued to suspend the registration of the firm’s planned offer and sale of two crypto assets, the Ducat and Locke tokens.

In an order filed on Friday, the SEC’s Enforcement Division alleged that a Form S-1 registration statement filed by American CryptoFed on Sept. 17, 2021, failed to contain required information about American CryptoFed’s business, management and financial condition, including audited financial statements.

The Form S-1 also contained “materially misleading” statements and omissions, including inconsistent statements about whether the tokens are securities, according to the SEC’s Enforcement Division.

The Enforcement Division also alleged that American CryptoFed failed to cooperate during an examination of its registration statement.

“An issuer seeking to register the offer and sale of crypto assets as securities transactions must furnish the required disclosure information to the SEC,” David Hirsch, chief of the Enforcement Division’s Crypto Assets and Cyber Unit, said in a statement.

“American CryptoFed not only failed to comply with the disclosure requirements of the federal securities laws, but it also claimed that the securities transactions they seek to register are not in fact securities transactions at all,” he added. “The Enforcement Division is seeking to stop American CryptoFed’s registration to protect investors against misleading information.”

Commenting on the SEC’s action, Xiaomeng Zhou, American CryptoFed chief operating officer and organizer, noted the order was pursuant to Section 8(d) of the Securities Act of 1933.

But, in a comment he sent by email to ThinkAdvisor, he argued: “The subject matter of the Section 8(d) Order has not yet existed. American CryptoFed DAO’s Form S-1 Registration Statement includes a ‘Delaying Amendment,’ which means that the American CryptoFed DAO’s Form S-1 is a subject matter of Section (a) and Section 8(b) of the Securities Act of 1933.

“The Section 8(b) of the Securities Act of 1933 only allows the SEC to issue a Refusal Order to provide further clear guidance for American CryptoFed DAO to complete the Form S-1 registration, not Stop Order. The SEC abused the Securities Act of 1933 to unlawfully delay or stop or obstruct American CryptoFed DAO’s legitimate disclosure through the Form S-1 Registration Statement.”

The SEC had, on Sept. 15, 2020, issued an order denying the Division of Enforcement’s motion to expedite enforcement proceedings against American CryptoFed DAO.

(Image: Chris Nicholls/ALM, Adobe Stock)


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.