{"id":21437,"date":"2018-09-11T20:36:38","date_gmt":"2018-09-11T20:36:38","guid":{"rendered":"http:\/\/ci027cfe63e0132697"},"modified":"2018-09-11T20:36:38","modified_gmt":"2018-09-11T20:36:38","slug":"two-one-sec-slaps-crypto-hedge-fund-broker-registration-failures","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/business\/two-one-sec-slaps-crypto-hedge-fund-broker-registration-failures","title":{"rendered":"Two-for-One: SEC Slaps Crypto Hedge Fund, Broker With Registration Failures"},"content":{"rendered":"
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In what it deems a first for both enforcement actions, the United States Securities and Exchange Commission (SEC) is charging two entities with registration failures.<\/p>\n

First in line, TokenLot LLC, the self-named \u201cICO Superstore,\u201d is being charged<\/a> with acting as an unregistered broker-dealer in the \u201cfirst case charging unregistered broker-dealers for selling digital tokens after the SEC issued The DAO Report<\/a> in 2017.\u201d A seminal document in defining ICOs and tokens as securities, the DAO Report was released in July of 2017 and classified DAO tokens as unregistered securities<\/a> following the infamous 2016 hack.<\/a><\/p>\n

In \u201cits first-ever enforcement action finding an investment company registration violation by a hedge fund manager based on its investments in digital assets,\u201d the SEC has also charged Crypto Asset Management LP (CAM) with operating as an unregistered investment company while falsely branding itself as the \u201cfirst regulated crypto asset fund in the United States.\u201d<\/p>\n

CAM and its sole manager Timothy Enneking reportedly raised over $3.6 million in 2017 by providing illegal investment management services. The company also facilitated \u201can unregistered non-exempt public offering\u201d and invested roughly 40 percent of its funds in cryptocurrencies, but, upon facing action from the SEC, CAM terminated the public offering and instituted a buyback for its investors. In addition, Enneking acquiesced to the SEC\u2019s censure and agreed to pay a fine of $200,000 without confirming or denying the charges.<\/p>\n

Facing its own pressure from the regulatory agency, TokenLot and its principals, Lenny Kugel and Eli Lewitt, paid $471,000 in disgorgement with $7,929 in interest, agreeing to \u201cretain an independent third party to destroy TokenLot\u2019s remaining inventory of digital assets.\u201d <\/p>\n

\u201cWithout admitting or denying the SEC\u2019s findings,\u201d the agency claims, Kugel and Lewitt will each pay individual fines of $45,000 and have \u201cagreed to industry and penny stock bars and an investment company prohibition with the right to reapply after three years.\u201d<\/p>\n

These penalties come after TokenLot handled funds from more than 6,100 clients and managed over 200 different cryptocurrencies in the process. Its business model operated under trading profits and taking \u201ca percentage of the money that TokenLot raised for ICOs.\u201d The majority of the Michigan-based company\u2019s trading activity took place after the DAO Report was released, ceasing in February 2018.<\/p>\n

\u201cU.S. securities laws protect investors by subjecting broker-dealers and other gatekeepers to SEC oversight, including those offering ICOs and secondary trading in digital tokens,\u201d Stephanie Avakian, co-director of the SEC\u2019s Enforcement Division said in the press release regarding TokenLot. \u201cWe continue to encourage those developing digital asset trading businesses to contact the SEC staff at FinTech@sec.gov for assistance in analyzing registration and other securities law requirements.\u201d<\/p>\n

Earlier today, FINRA, the SEC\u2019s self-regulatory complement in the private sector, filed a complaint<\/a> against Timothy Tilton Ayre for \u201cthe unlawful distribution of an unregistered cryptocurrency security called HempCoin,\u201d in conjunction with his publicly traded company, Rocky Mountain Ayre. Both cases are emblematic of how the largely unregulated cryptocurrency industry continues to grapple with formal regulatory organizations as its popularity increases.<\/p>\n","protected":false},"excerpt":{"rendered":"

In what it deems a first for both enforcement actions, the United States Securities and Exchange Commission (SEC) is charging two entities with registration failures.<\/p>\n","protected":false},"author":3468,"featured_media":21438,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[917,183],"class_list":{"0":"post-21437","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-dao","9":"tag-sec"},"author_data":{"id":3468,"name":"Aaron Van Wirdum And Colin Harper","nicename":"aaron-van-wirdum-and-colin-harper","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/88b6c65a7515990786b1c04473e15469e5b0d0fffef947ed629a60854e1cb426?s=96&d=robohash&r=g"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/two-for-one-sec-slaps-crypto-hedge-fund.jpg","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/21437","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/3468"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=21437"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/21437\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/21438"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=21437"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=21437"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=21437"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}