Former Member of SEC’s Cyber Unit, Philip Moustakis, Comments on ICOBox Enforcement Action: “a Somewhat Irresistible Case for SEC Staff”

Yesterday, Crowdfund Insider covered the Securities and Exchange Commission (SEC) enforcement action brought against ICOBox and its founder Nikolay Evdokimov. The complaint by the SEC specifically targeted ICOBox’s own initial coin offering (ICO) and the fact that ICOBox provided services to other ICOs acting like a “broker-dealer” while not actually being one.

Today, we have some commentary from Philip Moustakis, former senior counsel at the SEC who investigated and litigated the SEC’s first-ever Bitcoin-related enforcement action. Moustakis is now counsel at Seward & Kissel LLP but while at the SEC he was a member of the SEC’s Cyber Unit from its inception that addressed the ICO sector and cryptocurrencies in general.  Moustakis was also a founding member of the SEC’s Distributed Ledger Technology Working Group, formed to coordinate the response across the SEC’s divisions and offices to the emerging technology.

a smart case for the SEC to bring because, according to the allegations, it cuts off a channel for the issuance of unregistered digital securities #ICOBox Click to Tweet

Moustakis said the SEC charged that ICOBox’s ICO for its own token, confusingly called ICOS, as it amounted to an unregistered securities offering in violation of the registration provisions of the federal securities laws and. He pointed to the fact that ICOBox acted as an unregistered broker in connection with its work in facilitating and marketing its clients’ ICOs, including the ICO of Paragon Coin, Inc. – a company now in the midst of a recission of funds raised from its ICO.

“ICOBox’s ICO, according to the SEC’s complaint, was a pretty straightforward capital raise and, in that respect, the registration violations charged are not controversial,” stated Moustakis. “But it was a smart case for the SEC to bring because, according to the allegations, it cuts off a channel for the issuance of unregistered digital securities in the U.S. Furthermore, the action may now cause token issuers whose ICOs were facilitated or marketed by ICOBox to take another look at their offerings, determine what federal securities law issues, if any, they may have, and consider appropriate remedial steps.”

Moustakis said it may have been  a case that was “somewhat irresistible case for SEC staff to bring:”

“According to the complaint, ICOBox was aware of the SEC’s Report of Investigation on The DAO (which put the industry on notice that digital assets offered in ICOs could be deemed securities under the federal securities laws), and openly dismissed the idea that the federal securities laws may apply to their activities in press interviews and on social media, and to a potential investor who asked rather pointed questions on whether the ICO could be offered in the U.S. In other words, the allegations depict a company sticking its thumb in the eye of the SEC, and its enforcement and education efforts in the digital asset space.”

Expect more SEC enforcement actions to follow – especially with post-DAO initial coin offerings.

ICOBox openly dismissed the idea that the federal securities laws may apply to their activities #ICO #Fraud #SEC Click to Tweet
Sponsored Links by DQ Promote

You may also like...

Send this to a friend