• The SEC goes after another cryptocurrency project for illegal securities sale.
  • The regulator applies the Howey Test to the cryptocurrency projects.

The US regulator is hunting for ICOs of cryptocurrency and blockchain projects that qualify as an illegal securities sale. The FXStreet already reported that the Securities and Exchange Commission (SEC) won a case against Kik Iinteractive Inc. And here comes a new lawsuit against Salt lending.

Too Salty?

SALT Blockchain, the company behind SALT Lending service, launched an initial public offering (ICO) and raised over $47 million by selling tokens from June 2017 to December 2018. 

The platform created by the SALT Blockchain team allowed cryptocurrency owners to take loans and use their digital assets as collateral. The idea behind the service was to enable crypto holders to raise cash without selling their coins.

In February 2018,  SALT Blockchain came to the SEC's attention that initiated an investigation, and served the company with the subpoena seeking records related to the ICO.

Based on the recent announcement, published on the regulator's official website,  SALT Blockchain will have to return funds to the investors that participated in its ICO in 2017. 

The regulator emphasized that the company carried out an unregistered securities sale and thus violated the existing legislation. The SEC explained that the tokens qualify as securities as the company promised investors a return on their investments. 

Now  SALT Blockchain has  14 days to notify the investors about the SEC's decision and arrange the refunding procedure. After that, investors will have three months to claim their money back. Apart from that, Salt has ten days to pay a civil penalty to the SEC in the amount of $250,000.

A long line of SEC's victims

The US regulator has stepped up its actions against ICOs that may qualify as an unregistered securities' sale. Kik and Salt are the latest cases. 

Also, a couple of weeks ago, the SEC charged Unikrn, an operator of an online eSports gaming and gambling platform, for conducting an unregistered initial coin offering (ICO) of digital asset securities. The company has agreed to settle the claims by paying a civil fine in the amount of $6.1 million.

In May 2020, the SEC clamped down on  BitClave Pte Ltd; the company raised over $25 million by selling its Consumer Activity Tokens (CAT) to approximately 9,500 investors from June to November 2017. The regulator concluded that the company actually sold securities as it emphasized the investment potential of the tokens.  BitClave was ordered to return the funds raised during the ICO (over $25 million) and the interest and pay a civil fine in the amount of $400,000.

In February 2020, blockchain technology startup Enigma MPC was ordered to pay a $500,000 penalty for conducting an unregistered offering of securities in the form of an ICO. Enigma raised about $45 million by selling ENG Tokens in 2017.

Who is vulnerable

Above are the legit projects punished by the Securities and Exchange Commission in 2020. They were not scams or frauds, but their tokens qualified as securities, according to the regulator. 

Consequently, all companies with the ICO that may be classified as securities are at risk. The SEC uses the Howey Test to define whether the token sale is a security. 

However, the main criteria are the revenue expectations of the investors. If the project team led the participants to believe that their tokens would become more valuable over time, the chances are that the SEC will go after them. 

Also, the regulator pays attention to whether or not the investors' potential profits are entirely dependent upon a third party's work.  

If the SEC determines that a cryptocurrency token is classified as a security, it may take legal actions against the company that sold it without prior registration in compliance with the Securities law. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed

Latest Crypto News

Latest Crypto News & Analysis

Editors’ Picks

XRP price to pull a 180 as Ripple bulls come out of the woodwork

XRP price lacks volatility as it trades close to a crucial support level. While a major reason for this is its correlation with Bitcoin, a part of it also arises from the lack of interest among the investors for this coin. There is a good chance Ripple could see a brief uptrend that pushes it toward the immediate resistance barrier.

More Ripple News

Shiba Inu price faces tough challenges ahead before SHIB returns to $0.00004327

Shiba Inu price is struggling to break out of the prevailing chart pattern formation as it continues to record lower highs. However, the governing technical pattern projects a 46% ascent toward $0.00004327 if SHIB slices above $0.00003009.

More Shiba Inu news

XRP price to pull a 180 as Ripple bulls come out of the woodwork

XRP price lacks volatility as it trades close to a crucial support level. While a major reason for this is its correlation with Bitcoin, a part of it also arises from the lack of interest among the investors for this coin. A resurgence of bullish could see Ripple rally 11%.

More Ripple news

Google prepares for a foray into crypto, plans to expand payment division

Google is planning to enter into the cryptocurrency space as the firm has hired a former PayPal executive to lead its payment division. The multinational technology company is laying out a broader strategy to team up with a wider range of financial services including digital assets.

More Cryptocurrencies news

BTC eyes retest of $50,000

Bitcoin price shows a resurgence of retail interest as it bounced off a crucial psychological level. The recent uptrend is preparing a base on a short-term time frame so BTC can kick-start a larger leg-up. Interestingly, on-chain metrics are lining up with the bullish outlook portrayed from a technical perspective. An uptrend now seems inevitable for BTC and, therefore, the larger ecosystem.

Read full analysis