SEC Advisor Warns IEO Trading Platforms For Engaging In Broker-Dealer Activities

By Prashant Jha

While 2017 was the year of ICOs, the trend has shifted significantly in the next couple of years where the number of ICOs being conducted are on the decline and Security Token Offering (STOs) as well as Initial Exchange Offering (IEOs) are gaining more popularity. However, the concerns are still quite similar where ICOs popularity declined due to numerous Ponzi schemes that were run in the name of ICOs leading many governments including China and South Korea to completely ban ICOs.

Now, the same trend seems to have been growing with IEOs as well, where the SEC has warned the platforms which list tokens issued through IEOs for a fee.  Valerie Szczepanik, the advisor for the SEC has recently warned the IEO token listing platforms to be careful of their wrongdoings.

Szczepanik, who is also famously known as the Crypto Czar, during her Consensus 2019 speech said that the platforms promising to list tokens for IEOs are working as brokers for the token providers and need to be registered with the regulators.

She said,

“If they are not registered, they will find themselves in trouble in the U.S., if they have a U.S. issuer or U.S. buyers, if they are operating on the U.S. market.”

She also presented an example in the form of TokenLot platform run by Lenny Kugel and Eli L. Lewitt to prove her point. The platform presented itself as the ICO superstore, but primarily functioned as the cryptocurrency broker-dealer distributing the projects.

“This was a platform that was assisting to bring buyers to ICOs […] In that case, there was an enforcement action charging the platform with acting as an unregistered broker-dealer and participating in the distribution in violation of the registration provisions.”

The SEC has fined the platform owners for a sum of  $471,000 for their deeds. SEC has already released a set of guidelines back in April this year to differentiate between a security and a crypto token, in order to help the ICO conductors and token issuers to check whether the offering falls under the federal security laws.

Prashant Jha

As a content writer Prashant believes in presenting complex topics in simple laymen terms. He is a tech enthusiast and an avid reader.

Related Posts