SEC cracks down on cryptocurrency shenanigans, report says
US regulators have begun a broad investigation into initial coin offerings of cryptocurrencies, according to The Wall Street Journal.
- Shankland covered the tech industry for more than 25 years and was a science writer for five years before that. He has deep expertise in microprocessors, digital photography, computer hardware and software, internet standards, web technology, and more.
The SEC is reportedly tightening the screws on cryptocurrency offerings.
US regulators apparently are pushing harder to squeeze the snake oil out of the new cryptocurrency technology.
Digital currency and its underlying technology, blockchain, has the potential to refashion financial transactions and data sharing. But there are plenty of shenanigans, particularly through the money-raising process called initial coin offerings (ICOs), through which people can invest in new cryptocurrencies.
Now the Securities and Exchange Commission is cracking down more aggressively and has sent cryptocurrency companies dozens of subpoenas and information requests, The Wall Street Journal reported Wednesday. The SEC's requests seek information on investors, marketing materials, details on people involved and their locations, and more, according to lawyers who've seen the requests, reports cryptocurrency news site CoinDesk. One request was 25 pages long and "hyper-detailed," according to an unnamed lawyer CoinDesk heard from.
Plenty of people have gotten rich off cryptocurrencies like bitcoin and ether as valuations surged along with investor interest in 2017. The frenzy has slowed down for now. But startups, big businesses and cryptocurrency enthusiasts are still actively pushing the technology, and its long-term future is uncertain.
The SEC didn't immediately respond to a request for comment. But there's growing evidence it's taking a stand against shady ICOs. SEC Chairman Jay Clayton in January warned lawyers and accounts that they were falling short in their duties when it came to ICOs. "I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the US securities bar," Clayton said.
The SEC has taken enforcement actions, too. In December, the agency froze assets of a cryptocurrency firm it alleged was a fraud, halted an ICO in January for another it called "an outright scam" and suspended trading in February in three companies that claimed cryptocurrency or blockchain dealings.
Today's initial coin offerings make the cryptocurrency realm very much like the wild west, Marina Niessner, an assistant professor of finance at Yale School of Management, said in an earlier interview. But eventually, the lawless phase will end, she predicted.
"My guess is a lot of the cryptocurrency stuff is probably going to go away," she said. Blockchain, though, which can be applied more broadly to business transactions and data-handling technology, "is probably here to say. It'll streamline a lot of finance."
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