In the wake of the US Securities and Exchange Commission’s November 16th ruling that found two crypto startup companies in violation of securities laws, Pantera Capital Management says that up to 25% of the ICO-backed crypto and blockchain companies could be in violation.
The backlash could have various consequences, one of which would be that the companies are forced to refund investors. Paragon Coin, one of the two companies found to be in violation, has already been ordered to repay its investors since they were regular people and not accredited investors.
Dan Morehead and Joey Krug, Pantera’s co-chief investment officers, wrote in the company’s newsletter on Thursday, cited by Bloomberg,
“While we believe the vast majority of the projects in our portfolio should not be affected, approximately 25 percent of our fund’s capital is invested in projects with liquid tokens that sold to U.S. investors without using regulation D or regulation S.
If any of these projects are deemed to be securities, the SEC’s position could adversely affect them. Of these projects, about a third (approximately 10 percent of the portfolio) are live and functional and, while they could technically continue without further development, ending development would hinder their progress.”
The SEC has cracked down on the crypto world in the past few months.
In November, they fined celebrities Floyd Mayweather and DJ Khaled for failing to report payments they received for promoting coins, while the popular coin exchange EtherDelta was hit with a $400,000 fine for failing to report as a securities exchange.
Meanwhile, in October, the SEC launched an initiative in support of crypto and blockchain technology. It revealed that while the Commission is strict, the regulators are not wholly opposed to digital currencies.
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