U.S. SEC Brings the Heat; Scores of Subpoenas in ICO Probe

In what could be its most aggressive move to crack down on fraud in the crypto space, the U.S. SEC has reportedly issued scores of subpoenas to people who’ve held, or who are planning on holding, ICOs.

When the U.S. Securities and Exchange Commission’s chairman said last month that the agency was monitoring the crypto space, he left out the part about scores of subpoenas and information requests being prepped to be sent to dozens of ICO players.

News of the subpoenas came yesterday from a story published by the Wall Street Journal. The idea that scores of legal papers were sent to those behind the ICOs was enough to freak out many in the crypto space. Bitcoin fell about two percent, but then recovered to $10,409, at the time of writing Wednesday night.

The Wall Street Journal reported Wednesday evening (New York time) that it had been tipped off about the subpoenas by an unidentified people familiar with the matter.

In the article, which you can only read if you have a subscription to the site, it is noted that the SEC was seeking information about the structure of ICO sales and pre-sales. A Wall Street Journal staffer tweeted:

Writing on the wall

If this seemingly massive SEC probe is underway, it would be the largest ever probe of its kind to hit the crypto space by the commission. The SEC has shuttered ICOs after finding they were fraudulent, but if they have indeed issued scores of subpoenas, it would be unprecedented.

When you review the statements made, and actions already taken, by the SEC concerning ICOs, you can probably see that the commission was readying to take some kind of action. For example, last month the SEC’s Office of Compliance Inspections and Examinations (OCIE) announced its 2018 examination priorities, and at the top of the list were cryptocurrencies and initial coin offerings.

We told you in October of last year about the SEC ramping up its efforts to protect investors from fraudulent ICOs. The SEC’s chairman Jay Clayton said at the time that the ICO space was a ripe area for pump-and-dump schemes. The reason stems from technology and the electronic means by which scammers can avoid being caught. The anonymity at the heart of the cryptocurrency space and ICOs make it harder to catch the bad actors.

He added:

“Through the dedication and expertise of our Division of Enforcement

(Enforcement) staff and its leadership, we are able to root out fraud and shady practices effectively and with unwavering purpose.  Enforcement is focused on protecting all investors – without favor for account size, geography or other measures of priority – and that is clear from recent enforcement actions targeting pump and dump schemes…”

Also, it should be noted that a report released this week showed that almost half of the ICOs launched in 2017 have failed. Famed financial advisor and CNBC regular Josh Brown tweeted:

As crypto players and observers absorbed the news of the subpoenas, few ignored the gravity of the situation. On his YouTube channel, ‘Crypto Bobby’ said Bitcoin will likely be unaffected by the probe.

He then added the following:

“Depending on how this SEC probe goes into ICOs, it could have I would say neutral to negative effects. I really don’t see much of a way this is a positive unless they come out with some really nice, clear guidelines, but I just don’t know if that’s in the SEC’s wheelhouse to do so.”