#CFTC charges Breonna Clark, Venture Capital Investments Ltd., a Colorado LLC , w/ fraud & failing to register with the CFTC; alleged defendants solicited U.S. residents to trade forex contracts, #Bitcoin other digital assets via a commodity pool operated by the defendants. /1
Allegedly collected $534,829 from ~72; defendants used at least $418,000 for personal expenses& to make Ponzi-type payments to other pool participants; misled participants about experience, investment track record, sent false statements; /2
CFTC seeks restitution, disgorgement , civil monetary penalties, permanent registration and trading bans, and a permanent injunction against future violations of the CEA; Got help investigating from Govts of Bulgaria, New Zealand, Seychelles, St. Vincent & Grenadines, UK.
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Take aways from the #blockfi settlement with the #SEC (sec.gov/litigation/adm……) 1. BIA were notes under the Reves test; one factor is that there is "no alternative
regulatory scheme or other risk reducing factors exist with respect to BIAs" Congress can of course, set out a /1
an alternative framework that would potentially push these sorts of ventures into a different regulatory classification. 2. the offer and sale of notes is an investment contract. Yes, you can be debt and an investment contract; the pooling of assets is the key factor here. /2
3. Blockfi was a 40 act company; 40% of its assets were investment securities - including loans. /3
There has been lots of talk about #uniswap front end interfaces blacklisting #tokens that might be #securities. This is not an attack on #DeFi or regulation of #DeFi specifically, but instead a logical example of how existing regulation applies to legally addressable entities /1
including those that facilitate the use of #decentralized systems- in this case, legally addressable interface providers. And this isn’t new. Quietly, many front end providers are also engaged in #sanctions compliance. While laws obviously apply to legally addressable actors, /2
this does not mean that regulation has applied or will be applied directly to protocol code, at least not yet. This is b/c code itself is not legally addressable. It has its own rule-set governing its environment, & law cannot change code, although law can act on people /3
These ventures use code to enable groups of people to act collectively to affect rights to #digital assets. We call these “decentralized ventures.” These decentralized ventures enable transactions among their participants in accordance w/rules created and enforced by their code;
human participants in these decentralized ventures interact with the venture, & sometimes with each other, using #smartcontracts. Smart contracts may break, or behave in unexpected ways. What happens when a smart contract defect /error harms a decentralized venture user?
We've got a new proposed #SEC#token#safeharbor that would let issuers offer tokens in the US. It's big. But, what's new? How is it different from the prior proposal? What's new? You guessed it. It's unavoidable, It's inevitable. It's a #THREAD. Let's dive in/1
Right off the top, we have the elimination of the "good faith" provision that was previously implied upon the issuers in a(1) & of a(4) which required the issuer to act in good faith to "create liquidity for users." /2
New section a(5) includes reference to the new "Exit report" which is a new requirment defined and explained further down but tldr; its a report issued by the issuer's counsel that asserts whether the tokens will be a security or not after the 3 year period. Good inclusion /3
3 most significant changes: mandatory semi-annual updates to the plan of development disclosure and a block explorer; exit report requirement with analysis by outside counsel explaining why the network is decentralized or functional, or an announcement that the tokens will