Thread by @DaveYounts

1| Will the SEC go after coin promoters?
Let’s begin by analyzing their statement from November of 2017.

2| Before proceeding, please be advised that while I am a FINRA registered advisor, I am not a licensed attorney and you should consult one if you feel at risk.
@DiaryofaMadeMan @MichaelSuppo @boxmining @jasonappleton @cryptomocho @TheCryptoDog

3| Paragraph 1 “Celebrities and others” communicates that this isn’t just about athletes/Youtubers. It is anyone who promotes a security for their own personal gain. Promoting a company is fine. You can promote Tesla cars all day. Telling someone to buy $TSLA stock is different.

4| Note that this statement says “encourage the public.” Youtube/Twitter/Telegram groups with 5,000 people = public. Analyzing a security with your pals in a private discord group = not public.

5| Notice the SEC says “may be unlawful.” This is vague because it is still unknown which investments are securities and which aren’t. Last week’s court decision against the SEC (plaintiff) revealed that the substantial burden when it comes to proving a token is a security.

6| Paragraph 2: This is key. After proving it was a security, the SEC must prove that it was sold “in the United States.” Many ICOs which security-like features banned US citizens from participating. If no Americans invested, then they do not have to comply with US laws.

7| IF it was a security AND they were sold to US citizens or the company that did the raise was based in the US, then the endorser has a legal obligation to make specific disclosures:
- Nature of promotion
- Scope of promotion
- Amount of compensation received for promotion

8| What isn’t said is how the promoter must disclose this. Must a YouTube influencer state it in their video? Is putting it in the video description good enough? Or can they simply disclose it on your website as @DiaryofaMadeMan has recently done?

9| Also, we can only assume that the SEC expects the disclosures to be made at the time of promotion, and not 3-12 months later. This creates a dilemma if you promoted something in 2017 that you now know is a security. Do you disclose it or hope to slide by unnoticed?

10| The SEC then discusses liability for violating “anti-fraud provisions” of securities laws. Please consult your legal counsel on this one. My opinion is that this covers promoting something you know to be a scam or fraudulent business *cough* #BitConnect

11| “Particupating in an unregistered offer and sale of securities” seems to refer to people involved directly with the business, ie. Advisors who promote the project.

12| Finally, let’s discuss acting as an unregistered broker. The top two tests for whether you are a broker-dealer are 1) do you take a performance fee (ie. 5% of funds raised via my pool) and 2) do you custody funds.

13| The concern I have here centers around the performance fee. I believe that many promoters ran their own pools and charged fees on their raise, whether manually or via services like @primablock. This could be a major issue. Consult legal again...

14| Paragraph 3 is a warning to investors that most promoters don’t have the proper education, experience or skill required to analyze investments and provide sound financial advice. They all cover their backs by saying # DYOR, but then say this is their top 5 pick 100x for 2018.

15| I believe the SEC will focus on promoters who defrauded US investors on proven scams and securities that sold to Americans. If you provided disclosures to viewers and the project didn’t sell to US investors and wasn’t a scam, you’re probably safe. Again, consult a lawyer.