On July 17th 2019, the New Jersey Bureau of
Securities filed a civil
action complaint targeting an Initial Coin Offering (ICO) which took place
in its jurisdiction back in 2018. The ICO, says the Bureau, constituted a securities
offering but failed to comply with the associated regulatory requirements.
Why New Jersey
says the Pocketinns ICO was a Securities Offering
In January of 2018, Pocketinns Inc. sold approximately
$410,000 worth of digital assets called PINNS tokens to 217 investors.
The state of New Jersey is now claiming that Pocketinns sold
unregistered securities.
Neither Pocketinns Inc. nor its president— Sarvajnya G.
Mada— have been registered with New Jersey’s Bureau of Securities.
The Bureau says the offering was in violation of New Jersey’s
Uniform Securities Law, since only 11 investors provided documentation to
demonstrate their accredited investor status.
According to Paul
Rodriguez, acting director of the Division of Consumer Affairs,
“By failing to take reasonable steps to verify that purchasers were accredited investors capable of bearing the increased risks associated with unregistered securities, the defendants violated the law and exposed investors to financial losses that could have been devastating.”
The complaint seeks to ban both Pocketinns and Mada from
selling securities in New Jersey, assess civil monetary penalties, and requires
both parties to pay restitution to investors who participated in the offering.
The Status of ICOs
in the United States
2018 saw increased
regulatory enforcement throughout the United States in the cryptocurrency
sector.
As a result, the funds raised through ICOs dropped sharply.
A report from the Wall Street Journal says ICOs now raise 58
times less than they did just a little more than one year ago.
Many criticized the ICO for curtailing the regulatory requirements
associated with raising funds and protecting investors.
At the same of the ICO drop, a new offering emerged: the Security Token
Offering (STO). In differing from the ICO, the STO abides by existing
securities requirements since the assets they tokenize explicitly declare
themselves as regulated financial securities.
So far, nearly $1 billion has been invested through security
tokens.
Real-world assets such as equity,
real
estate, and investment
funds have compliantly experienced the benefits
blockchain technology.
At the same time, there is a push for a new type of non-securities classification for certain digital assets in the United States. Congressman Warren Davidson has submitted legislation for such a push, and some states— such as Rhode Island and Colorado— have seen additional securities exempting legislation.
What do you think of the current situation regarding
ICOs and securities requirements among jurisdictions throughout the world? What
should be done to improve the situation? We want to know what you think in the
comments section below.
Image courtesy of NJ.gov.
The post New Jersey says a 2018 ICO was a Securities Offering, Demands Restitution appeared first on The Tokenist.
