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U.S. SEC announces its first-ever enforcement action
After having found an investment company registration violation by a hedge fund manager based on its investments in digital assets, the US Securities and Exchange Commission (SEC) announced its first-ever enforcement action.
According to the press release, “SEC entered an order finding that Crypto Asset Management LP (CAM) had offered some fund that operated as an unregistered investment company while faking itself as the ‘first regulated’ crypto asset fund in the United States.”
SEC entered an order, according to which the Californian hedge fund manager and its managing director Timothy Enneking raised more than $3.6 million over a period of months during late 2017 while falsely claiming that the fund was registered by the commission. By taking part in an unregistered liable public offering and investing 40 percent and above of the fund’s assets in the digital assets securities, CAM caused the fund to operate as an unregistered investment company.
Immediately after having known of the order, CAM terminated its public offering and offered buybacks to affected investors. Without admitting or denying the commission’s findings against them, CAM and its managing director agreed to pay a penalty of $200,000.
“Hedge funds seeking to ride the digital asset wave continue to proliferate. Investment advisers must be sure that the funds they offer adhere to the applicable registration obligations and must accurately represent their funds’ regulatory status to investors,” said C. Dabney O Riordan, co-chief, Asset Management Unit, Division of Enforcement, SEC.
SEC also issues charges against TokenLot LLC
In another case, the first-ever case of charging unregistered broker-dealers for digital tokens was also also issued by the SEC on September 11, 2018. TokenLot LLC (ICO Superstore) was charged operating as unregistered broker dealers. This is important as SEC had issued the DAO report in 2017 warning that those who offer and sell digital securities must adhere to the federal security laws.
Without admitting or denying the SEC’s findings, TokenLot, Kugel, and Lewitt consented to the SEC’s order and agreed to pay $471,000 in disgorgement plus $7,929 in interest.
TokenLot had bid a farewell message to its customers on its website
“It’s been an incredible journey! The TokenLot team wants to thank all of our customers for their support, loyalty, and business over the past year. Thanks to you, we were able to help many of the top blockchain projects achieve their funding goals. Unfortunately, due to the ever-changing regulatory landscape of the cryptocurrency space in our jurisdiction, we regret to inform you that we will be closing TokenLot.”
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