CryptocurrencyLaw and Legislation

SEC Cracking Down on Crypto: Sues Altcoin & Delays Bitcoin ETF Proposals

It seems that the U.S. Securities and Exchange Commission (SEC) is renewing its crackdown on crypto, a space which they may see believe is rife with rule-breaking.

Altcoin Project Veritaseum Slammed by SEC

Announced just hours ago, during the wee hours of Tuesday morning, the regulator has filed an emergency lawsuit against Veritaseum, a crypto project that was all the rage in 2017, and its acting chief executive officer, Reginald Middleton.

Reported first by The Block, the SEC is currently looking to stop the altcoins project and its founder from spending the proceeds of an ICO in 2017 and early-2019, which netted Veritaseum some $8 million. In the suit, the agency suggests that the offering made “material misrepresentations and omissions” about the potential and state of VERI, the project’s native token, to purposefully boost the value of the altcoin.

Indeed, the project, which was marketed as a project that could tokenize knowledge, help power autonomous machines, and back peer-to-peer capital markets, has long been questioned by investors.

The Block writes that the SEC claims that Middleton & Co. also evaded the SEC’s security registration requirements by classifying VERI as nothing more than “software” and “gift card” like credit.

VERI has dumped by 60% in the past 24 hours, falling under $6, trading far below its peak of $500 back during 2017’s absolute mania.

This is the SEC’s second large crypto case. Earlier this year, the SEC revealed that it would be suing Kik, the Canadian social media giant behind KIN, for breaking securities laws.

Robert Cohen, the Chief of the Enforcement Division’s Cyber Unit, noted that since the firm explicitly told investors that they could post a gain on their KIN tokens, the crypto assets could be classified as securities:

“Future profits based on the efforts of others is a hallmark of a securities offering that must comply with the federal securities laws.”

Bitcoin ETF Verdicts Pushed

The filing of the Veritaseum case isn’t the SEC’s only crypto action made over the past 24 hours.

On Monday, the SEC revealed that it would be simultaneously delaying its verdicts on three Bitcoin ETFs — yes, they’re still a thing. The pertinent products are from Bitwise Asset Management, VanEck and SolidX partners, and Wilshire Phoenix. Bitwise’s and VanEck’s products are both similar, in that they both plan to be 100% backed by Bitcoin; Wilshire’s product differs from the pack, intending to mix Bitcoin with short-term U.S. Treasury securities to reduce risk and volatility.

The SEC will have to make a final decision on Bitwise’s and VanEck’s proposal by mid-October. The delay of the Wilshire verdict gives the financial regulator another ~45 days to come to a conclusion, meaning the next ruling deadline is September 29th.

As reported by Ethereum World News just prior to the verdict, this outcome (or lack thereof) was mostly expected.

Photo by Spencer Davis on Unsplash
Nick Chong
About author

Nick has been enamored with cryptocurrencies since foraying into the industry in 2013. He has since gotten involved as a reporter, covering news on a number of blockchain- and crypto-related outlets.
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