This week, information appeared about several large-scale proceedings in the cryptosphere. Thus, the Financial Services Industry Regulation Service (FINRA) accused a Massachusetts resident of selling unregistered HempCoin tokens. The Securities and Exchange Commission (SEC) fined the TokenLot startup for being an unregistered broker dealer selling digital tokens. And the New York court in the context of the criminal prosecution of US citizen Maxim Zaslavsky recognized ICO as securities. But all in order.
FINRA filed a complaint against Timothy Tilton Ayre of Agavam, Massachusetts, accusing him of securities fraud and the illegal distribution of unregistered crypto currency called HempCoin. This case represents the first disciplinary sanction FINRA, connected with digital money.
FINRA also claims that in June 2015, Eira bought rights to Hempcoin and repackaged it as security supported by RMTN common shares. The businessman sold HempCoin as “the world’s first stock-holding currency” in a publicly traded company and promised investors that each coin would be equivalent to 0.10 common shares of RMTN.
Investors namaynili more than 81 million HempCoin before the end of 2017 and traded a token on two crypto-exchange markets. FINRA accused Eyre of illegally distributing an unregistered security, because he never registered HempCoin.
The entrepreneur has the opportunity to protect himself before the disciplinary commission of the department. If he is found guilty, he will be fined, reprimanded, temporarily or permanently prohibited from working in the securities sector, the need to pay compensation for damage.
The SEC accused TokenLot LLC and its owners that they acted as unregistered broker-dealers. This is the first time that a regulator will charge a fine from unregistered broker-dealers for the sale of digital tokens after the agency issued a DAO report in 2017. Then the SEC warned that those who offer and sell digital securities must comply with federal securities laws.
The SEC states that TokenLot, Lenny Kugel and Eli L. Lewitt promoted the TokenLot website as a way to purchase digital tokens during the ICO, and also participated in the secondary trading. The project received orders from more than 6100 retail investors and processed over 200 different digital tokens, which SEC defined as securities. Business profits included trading profits and a percentage of the money that TokenLot collected from the ICO. The company’s activities required that TokenLot, Kugel and Levitt be registered with the SEC as broker-dealers, but in reality it was not.
TokenLot worked from July 2017 to the end of February, and most of his business was conducted after the release of the DAO report. According to the regulator’s order, TokenLot voluntarily began to wind down and return payments to investors for outstanding orders. TokenLot, Kugel and Levitt were also charged with violating registration provisions in connection with their conduct. As a result, they were fined $ 471 thousand.
The ruling of US District Judge Raymond Dearie in Brooklyn allows federal prosecutors to continue the case against US citizen Maxim Zaslavsky. A Brooklyn resident was arrested in November last year on charges of deceiving investors who invested in two crypto-currencies – REcoin and Diamond, and violating the federal law “On the Stock Exchange.” This is reported by Reuters.
Prosecutors said that Zaslavsky last year collected at least $ 300,000 from the sale of REcoin, which, according to the arrested, was secured by real estate, and another crypto-currency called Diamond was allegedly provided with diamonds. In fact, according to prosecutors, no real estate or diamonds supported virtual currencies.
In March, Zaslavsky’s lawyers were asked to drop the charges, arguing that REcoin and Diamond are currencies, not securities, and therefore are not subject to the “Securities Act”.
District Judge Diri dismissed this argument, saying that the federal law on securities should be interpreted “flexibly”. The judge noted that the SEC also considers some virtual currencies as securities.
In addition, today it was reported that the SEC closed the hedge fund Crypto Asset Management, which claimed that it is regulated by the agency.