The US Securities and Exchange Commission warned holders of virtual currencies to look out for criminal activity in the market.
The head of the SEC, Jay Clayton, stated that many operators of Bitcoin scams were offering deals that were “too good to be true,” and that investors should be wary of anyone asking an investor to act quickly. Clayton stated that one could easily fall prey to these kinds of scams, and that one’s principal investment could easily be lost.
On the other hand, Clayton’s view was not entirely negative. He stated that initial coin offerings (ICOs), could be a valid means for startup businesses and entrepreneurs to raise capital, which is essential for bootstrapping projects and small teams, although this method should be cautioned against. “Any type of fundraising that provides securities (tokens) should come with disclosure statements and other documents to protect investors”, he said.
While this stance makes it obvious that the Security Exchange Commission looks at the cryptocurrency market as under its control, it is still more open minded than other countries have been. For example, in South Korea, the country has completely banned ICOs, noting that severe penalties and fines will issued to people attempting one.
SEC Prevents Munchee ICO
Coincidentally, the same day that Clayton made the above statements about cryptocurrency investments, the SEC was successful in stopping a company called Munchee from launching an ICO for its food inspection service.
Munchee had wanted to raise 15 million dollars in initial funding to develop projects, a phone application. The app was going to be used for reviews of various food establishments, and could have provided a platform for users to buy and sell services using the tokens issued as part of its ICO.
The proposal by Munchee was enough for the SEC to consider that it was under its authority, and decided to stop the company from launching on the blockchain. In response, Munchee decided to pull out from their ICO deal, barely avoiding a fine and other penalties from the SEC.
A key factor in preventing penalties to firm was that Munchee withdrew its ICO in a short span of time, cooperated with investigators, and returned all monies owing to its initial investors.