Topic: How can an ICO be considered as SEC compliant (Read 299 times)

Wow .. Never Knew Australia had this in place

Incorrect.

They are breaking the existing securities law and are illegal, even if they are only subtly securities.

Australia recently explained this in detail. And the SEC also explained it when they wrote the DAO report.

Perhaps what you mean is that if they are not too blatantly securities (e.g. not ERC-20) tokens, then the regulators might not take action against them soon?

It's not that they're SEC compliant - the SEC hasn't really drafted the full rules yet. It's an ongoing process but for now most ICO's have the greenlight as long as they're not blatantly securities.

Lol governments actually think they can regulate crypto with the same mentality as securities/stocks, it will not work out that way.

I wrote a detailed blog and an entire thread about this.

From their website, these are some guidelines they provided :

Some Key Points to Consider When Determining Whether to Participate in an ICO

If you are thinking about participating in an ICO, here are some things you should consider.

    Depending on the facts and circumstances, the offering may involve the offer and sale of securities.  If that is the case, the offer and sale of virtual coins or tokens must itself be registered with the SEC, or be performed pursuant to an exemption from registration.  Before investing in an ICO, ask whether the virtual tokens or coins are securities and whether the persons selling them registered the offering with the SEC.  A few things to keep in mind about registration:
        If an offering is registered, you can find information (such as a registration statement or “Form S-1”) on SEC.gov through EDGAR.
        If a promoter states that an offering is exempt from registration, and you are not an accredited investor, you should be very careful – most exemptions have net worth or income requirements.
        Although ICOs are sometimes described as crowdfunding contracts, it is possible that they are not being offered and sold in compliance with the requirements of Regulation Crowdfunding or with the federal securities laws generally.

    Ask what your money will be used for and what rights the virtual coin or token provides to you.  The promoter should have a clear business plan that you can read and that you understand.  The rights the token or coin entitles you to should be clearly laid out, often in a white paper or development roadmap.  You should specifically ask about how and when you can get your money back in the event you wish to do so.  For example, do you have a right to give the token or coin back to the company or to receive a refund? Or can you resell the coin or token? Are there any limitations on your ability to resell the coin or token?

    If the virtual token or coin is a security, federal and state securities laws require investment professionals and their firms who offer, transact in, or advise on investments to be licensed or registered.  You can visit Investor.gov to check the registration status and background of these investment professionals.

    Ask whether the blockchain is open and public, whether the code has been published, and whether there has been an independent cybersecurity audit.

    Fraudsters often use innovations and new technologies to perpetrate fraudulent investment schemes.  Fraudsters may entice investors by touting an ICO investment “opportunity” as a way to get into this cutting-edge space, promising or guaranteeing high investment returns.  Investors should always be suspicious of jargon-laden pitches, hard sells, and promises of outsized returns.  Also, it is relatively easy for anyone to use blockchain technology to create an ICO that looks impressive, even though it might actually be a scam.

    Virtual currency exchanges and other entities holding virtual currencies, virtual tokens or coins may be susceptible to fraud, technical glitches, hacks, or malware.  Virtual tokens or virtual currency may be stolen by hackers.

Investing in an ICO may limit your recovery in the event of fraud or theft.  While you may have rights under the federal securities laws, your ability to recover may be significantly limited.

If fraud or theft results in you or the organization that issued the virtual tokens or coins losing virtual tokens, virtual currency, or fiat currency, you may have limited recovery options. Third-party wallet services, payment processors, and virtual currency exchanges that play important roles in the use of virtual currencies may be located overseas or be operating unlawfully.

Law enforcement officials may face particular challenges when investigating ICOs and, as a result, investor remedies may be limited. These challenges include:

    Tracing money.  Traditional financial institutions (such as banks) often are not involved with ICOs or virtual currency transactions, making it more difficult to follow the flow of money.
    International scope.  ICOs and virtual currency transactions and users span the globe. Although the SEC regularly obtains information from abroad (such as through cross-border agreements), there may be restrictions on how the SEC can use the information and it may take more time to get the information.  In some cases, the SEC may be unable to obtain information from persons or entities located overseas.
    No central authority.  As there is no central authority that collects virtual currency user information, the SEC generally must rely on other sources for this type of information.
    Freezing or securing virtual currency.  Law enforcement officials may have difficulty freezing or securing investor funds that are held in a virtual currency.  Virtual currency wallets are encrypted and unlike money held in a bank or brokerage account, virtual currencies may not be held by a third-party custodian.

Be careful if you spot any of these potential warning signs of investment fraud.

    “Guaranteed” high investment returns.  There is no such thing as guaranteed high investment returns.  Be wary of anyone who promises that you will receive a high rate of return on your investment, with little or no risk.
    Unsolicited offers.  An unsolicited sales pitch may be part of a fraudulent investment scheme.  Exercise extreme caution if you receive an unsolicited communication—meaning you didn’t ask for it and don’t know the sender—about an investment opportunity.
    Sounds too good to be true.  If the investment sounds too good to be true, it probably is. Remember that investments providing higher returns typically involve more risk.
    Pressure to buy RIGHT NOW.  Fraudsters may try to create a false sense of urgency to get in on the investment.  Take your time researching an investment opportunity before handing over your money.
    Unlicensed sellers.  Many fraudulent investment schemes involve unlicensed individuals or unregistered firms.  Check license and registration status on Investor.gov.
    No net worth or income requirements.  The federal securities laws require securities offerings to be registered with the SEC unless an exemption from registration applies. Many registration exemptions require that investors are accredited investors; some others have investment limits.  Be highly suspicious of private (i.e., unregistered) investment opportunities that do not ask about your net worth or income or whether investment limits apply.

I ve been reading about it,maybe not exactly SEC compliant but near.Most important token has to be in real use,that way it is like utility token and it can be traded.If token is non in real use than it is non-security and can be holded but not traded.There are some usa based ico's and will be more.ICO need to have hard cap,ico without hard cap is not permited.Tokens needs to give voting rights and ico has to be done by company,foundation etc.Mostly few guys are doing ico and thay simply cash out

As I know tokens shouldn't be a "security tokens", but can be an utility token. It shouldn't give dividents or any rights like voting.

It seems that being sec compliant is difficult for now. Most projects rejects participants from usa not to be caught by sec. I wonder how 0x were open to us citizens?

I do not think the Crypto market comes under SEC yet.

I think most ICO companies do not care about the law as they are just scams.

So how can an ICO be registered with SEC (US)

The only way the SEC would deem any ICO complaint is if they regulate it. Which is in my view what will eventually end up happening.

Hello, during filecoin ico, they said they were in compliance with SEC regulations.also SEC has red flagged some ICO's recently (example: REcoin) as fraud, how can we know if an ICO is really SEC compliant.