Welcome to Shearman & Sterling’s FinTech Blog, where we provide you with insight on key trends in the FinTech ecosystem. Here you can find relevant information with the latest on digital banking, FinTech regulation, digital assets, blockchain, AI, and more.
-
Two Celebrities Charged in Connection with ICO Promotions
12/05/2018On November 29, 2018, the Securities and Exchange Commission (SEC) announced that it has filed and settled separate charges against professional boxer Floyd Mayweather Jr. and musical artist Khaled Khaled (known as DJ Khaled) for their failure to disclose payments they received in connection with promoting investments in initial coin offerings (ICOs). Without admitting or denying the charges, Mayweather agreed to pay $300,000 in disgorgement, a $300,000 fine and $14,775 in interest, while Khaled agreed to pay $50,000 in disgorgement, a $100,000 fine and $2,725 in interest. Mayweather also agreed not to promote “any securities, digital or otherwise,” for three years, and Khaled agreed to the same ban for a period of two years.
Read More -
SEC Settles Charges Against Two Companies that Sold Digital Tokens in ICOs
11/29/2018For the first time, on November 16, 2018, the Securities and Exchange Commission (SEC) sanctioned two companies with civil penalties for violating the securities laws in connection with issuing digital tokens in an initial coin offering (ICO). Interestingly, the Division of Corporation Finance, Investment Management and Trading & Markets issued a joint statement in support of the Division of Enforcement’s actions. Without admitting or denying the findings, the two companies consented to the SEC orders finding that they violated Section 5(a) and 5(c) of the Securities Act of 1933 for failing to register the tokens as securities. The companies agree to $250,000 penalties and to cease and desist from future violations.
Read More -
SEC Charges Digital Asset Trading Platform Founder for Operating Unregistered Exchange
11/12/2018On November 8, 2018, the Securities and Exchange Commission (SEC) accused the founder of a digital asset trading platform of failing to register as a national securities exchange. Without admitting or denying the charges, the founder agreed to pay $300,000 in disgorgement and a $75,000 penalty, and to cease and desist from future violations of Section 5 of the Securities Exchange Act of 1934 (Exchange Act).
Read More -
SEC Halts Fraudulent ICO that Claimed Regulatory Approval
10/17/2018On Oct 11, 2018, the Securities and Exchange Commission (SEC) announced that it halted a planned initial coin offering (ICO) and related pre-ICO sales by Blockvest LLC and its founder, Reginald Buddy Ringgold, III. In seeking an emergency court order, the SEC alleged that Blockvest had falsely claimed that it and its affiliates received regulatory approval from various agencies, including the SEC and a fake agency called the “Blockchain Exchange Commission.” Blockvest and Ringgold also allegedly used the National Futures Association (NFA) seal in making false claims about their regulated status, even after the NFA sent them a cease-and-desist letter for doing so.
Read More -
Federal Judge Affirms CFTC’s Authority to Police Virtual Currency Fraud
10/03/2018On September 26, 2018, the U.S. District Court for the District of Massachusetts issued an order confirming that the Commodity Futures Trading Commission (CFTC) maintains the authority to police virtual currency fraud. The order was issued in response to a motion to dismiss charges against My Big Coin Pay, Inc. and several individuals for operating a fraudulent virtual currency scheme through which they solicited customers to purchase a virtual currency known as My Big Coin (MBC).
Read More -
Agencies Issue Multiple Digital Asset-Related Enforcement Orders
09/20/2018The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) last week issued three digital asset-related enforcement orders, and the SEC also suspended trading in two securities that track the value of digital assets. The orders mark an uptick in digital asset enforcement from previous months and suggest that regulators and self-regulatory organizations are still keeping a close eye on the nascent digital asset investment industry.
Read More -
SEC Order Shows Free Tokens Do Not Get a Free Pass From Securities Laws
09/07/2018The Securities and Exchange Commission cracked down on another initial coin offering, despite the fact that the parties were unable to raise any money. The SEC found that the efforts to fund oil exploration and drilling in California through the issuance of digital tokens called “Tomahawkcoins” or “TOM,” by Tomahawk Exploration LLC and David T. Laurance constituted an illegal securities offering in which they made materially false claims about the exploration prospects, the firm and Mr. Laurance’s background.
Read MoreCategories : Cryptocurrencies/Virtual Currencies, Enforcement, FinTech Regulation, ICOs, SEC, US Federal Regulation -
NASAA Cracks Down on Fraudulent ICOs and Enters into Information Sharing Agreement with the CFTC
5/30/2018At the North American Securities Administrators Association Conference on May 21, 2018, NASAA, an association of state and provincial securities administrators in the United States, Canada and Mexico, announced a joint effort among its members to halt fraudulent initial coin offerings and virtual currency-related investment products. The so-called “Operation Cryptosweep,” which was launched this past April, consists of NASAA members from 44 jurisdictions in the United States and Canada and has to this point led to nearly 70 inquiries and 35 pending and completed enforcement actions, with more expected in the coming months.
Read MoreCategories : CFTC, Cryptocurrencies/Virtual Currencies, Enforcement, ICOs, SEC, State Regulation, US Federal Regulation -
NY Attorney General Announces Cryptocurrency Exchange Inquiry
04/17/2018New York Attorney General Eric T. Schneiderman sent letters to thirteen cryptocurrency exchanges requesting certain key information on their operations, fee structures, internal controls, and customer safeguards. The letters also signaled the launch of the Attorney General’s broader “Virtual Markets Integrity Initiative.”
Read More -
CFTC Halts Fraudulent Binary Options Scheme Involving Virtual Currency
04/16/2018On April 16, 2018, the Commodity Futures Trading Commission (CFTC) filed a complaint charging two individuals and several companies with operating a fraudulent binary options scheme involving virtual currency and accepting customer funds without registering as a futures commission merchant.
Read More -
Federal Court Upholds That Virtual Currencies Are Commodities
03/06/2018On March 6, 2018, the United States District Court for the Eastern District of New York confirmed that virtual currencies are commodities within the anti-fraud jurisdiction of the Commodity Futures Trading Commission (CFTC). The order, which came in the form of a preliminary injunction, follows the CFTC’s January 18, 2018 civil enforcement action against Patrick K. McDonnell and his company CabbageTech, doing business as Coin Drop Markets (CDM), alleging that McDonnell had induced customers to send money and virtual currencies to CDM in exchange for virtual currency trading advice and purchasing on customers’ behalf. The CFTC also alleged that McDonnell and CDM misappropriated investors’ funds.
Read More -
Cryptocurrencies: A Big Week for U.S. Regulatory Attention
01/25/2018Jay Baris and Nathan Greene, partners in the Investment Funds group, authored an article entitled “Cryptocurrencies: A Big Week for U.S. Regulatory Attention,” summarizing a seemingly sudden burst of regulatory actions taken by the U.S. Securities and Exchange Commission, U.S. Commodity Futures Trading Commission and a state regulator over the span of just a few days in January.
Read MoreCategories : CFTC, Cryptocurrencies/Virtual Currencies, Enforcement, Federal Regulation, SEC, State Regulation