Pantera Crypto Hedge Fund Says Initial Coin Offerings Could Pay Millions Back in Refunds After SEC’s Ruling
A few weeks ago, the U.S. Securities and Exchange Commission announced an enforcement action against two Initial Coin Offerings (ICOs).
The ICOs were Paragon and Airfox. Both companies would have to be compliant with the securities regulations in the United States.
At close of FY 2018, we brought over a dozen standalone enforcement actions involving digital assets and ICOs. https://t.co/1uQ6udWD1d
— SEC_News (@SEC_News) November 14, 2018
These companies will have to pay a penalty of $250,000 and they will also have to repay millions of dollars in ICO revenues to investors.
Dan Morehead, the CEO of Pantera Capital, and Joey Krug, the company’s co-chief investment officer, wrote in a newsletter on Thursday that around 25% of ICOs that raised funds could be violating U.S. Securities laws and might have to return funds to investors.
Several ICOs did not register with the SEC and followed securities laws in the US.
“While we believe the vast majority of the projects in our portfolio should not be affected, approximately 25 percent of our fund’s capital is invested in projects with liquid tokens that sold to U.S. investors without using regulation D or regulation S.”
If those projects are then considered securities, the position taken by the SEC would affect them in a negative way.
Back in 2017 and the beginning of 2018, the number of ICO projects in the market expanded exponentially. The industry was growing with the market but it has been lately affected by falling prices in virtual currencies. At the same time, regulatory agencies are trying to regulate the space and improve the market.
Some of the ICOs that launched during that time were frauds and some others were just fake and tried to scam investors. This is why regulatory agencies started to pay closer attention to the market and try to regulate them.
During the last few months, the number of ICOs have been reduced and the funds gathered as well. The uncertainty in the regulatory environment and falling prices in the space have affected the whole ecosystem.