TronWeekly

Crypto World News

You are here: Home / Archives for ico

ico

SEC Tightens Noose Over Binance As It Investigates The Latter’s 2017 ICO Sale

by

US regulator SEC has now directed its attention to the world’s largest crypto exchange Binance to examine if its 2017 initial coin offering [ICO] for its BNB token is in violation of the securities rules that require prior registration with the agency.

In more troubling news, the platform currently faces multiple investigations in Washington. Sources closed to the matter revealed that the SEC has brought dozens of enforcement actions over ICOs, which involve issuing virtual coins to raise money.

Following the investigation, Binance released a statement saying, “it would not be appropriate for us to comment on our ongoing conversations with regulators, which include education, assistance, and voluntary responses to information requests.”

The firm added that it would be assisting the authorities and “we will continue to meet all requirements set by regulators.” 

Apart from BNB, the SEC is also probing possible trading abuses by the firm’s insiders and also investigating its American affiliate- Binance.US, formed in 2019. 

More Scrutiny Awaits Binance

The crypto exchange however maintained that Binance.com and Binance.US “are separate entities.” “The US branch is a separate trading platform that services US users by offering products and services that are compliant with US federal and state regulations,” the firm said.

In a separate statement, the US’s arm said it was “committed to upholding the highest standards of compliance.”

Anonymous experts sources said the SEC is also monitoring market-making entities linked to the founder Changpeng Zhao, commonly known as “CZ”.

Will Binance Meet Ripple’s Fate?

The latest development has raised concerns of Binance meeting a similar fate to that of Ripple Labs Inc., which is currently engaged in a bitter court battle with the SEC after the regulator sued the firm and two of its executives in December 2020 for allegedly breaking rules in selling a crypto token known as XRP.

In its defense, Ripple emphasized that its token acts as a medium of exchange for digital currency rather than a security, and called the SEC’s litigation flawed.

U.S. Securities and Exchange Commission chair Gary Gensler has been taking aim at crypto exchanges by asserting that most digital assets fall under the purview of the SEC and crypto trading platforms should be registered with the agency.

Tron Foundation Urges NY Federal Judge To Dismiss ICO Lawsuit

by

The Tron Foundation has requested a New York federal judge dismiss, what it called a “fatally flawed” class-action lawsuit that alleged securities violations through the China-based blockchain platform’s 2017 initial coin offering [ICO].

Tron’s ICO was conducted from the 24th of August to the 2nd of September, 2017. The foundation had reportedly secured $70 million from its native TRX token.

On April 3 when the lawsuit was filed, 10 other lawsuits were also filed in the New York Southern District Court against issuers and cryptocurrency exchanges. All of them alleged there was a distribution of unregistered securities.

Three years later, in April 2020 multiple lawsuits were filed against the issuers and cryptocurrency exchanges. In a particular lawsuit, the plaintiffs’ Alexander Clifford and Chase William brought a class action against Tron Foundation, its Co-founder and CEO Justin Sun, and Zhiqiang [Lucien] Chen. This stated, that the defendants in question allegedly promoted, offered, and sold TRON’s securities, ‘TRX’ tokens, throughout the United States, in violation of federal and state securities laws.

“Although TRON described the TRX tokens as something other than securities, they were securities. This was not clear to a reasonable investor at purchase, however, and would not have been reasonably apparent until, at the earliest, April 3, 2019, when the SEC released a detailed “Framework” to analyze digital assets, indicating that TRX and other similar digital tokens are “investment contracts” and therefore securities under Section 2 of the Securities Act of 1933.”

According to the latest motion filed by the foundation, it claimed that the case does not have any connection to New York while stressing that the lead plaintiffs, Colin Hardin, David Muhammad, and Chase Williams did not even engage in Tron’s ICO. Furthermore, the motion also pointed out that the suit was filed by the three plaintiffs nearly two years after the completion of the offering.

Tron’s motion asserted that three of the plaintiffs purchased their TRX tokens via Binance, which happens to be a secondary exchange to the offerings. Hence, it contended that the foundation should be dismissed since the underlying law does not cover deals done through secondary exchanges.

The latest motion filed by the defendants also argued that it does not have any control over plaintiffs’ decision to purchase TRX.

While rubbishing claims of being misleading and deceptive, Tron also stated,

“This claim was not even pleaded in the original complaint, and it is nothing but a litigation afterthought”

American Rapper T.I. In Troubled Waters For Endorsing Fraudulent ICO

by

Initial Coin Offerings [ICO] captured the attention of the entire crypto-verse a few years ago. However, it has also paved the way for several fraudulent platforms to enter the industry. While some say that the ICO bubble burst, the scams linked to it have been prolonged. More recently, a prominent actor along with a few others from Atlanta came under the purview of the United States Securities and Exchange Commission [SEC] for endorsing fraudulent ICOs.

T.I. To Pay $75K As Penalty

In a recent press release, the SEC highlighted that prominent actor and rapper, Clifford Harris, more popularly known as T.I. or Tip was charged for promoting Ryan Felton’s fraudulent unregistered ICOs. Apart from Tip and Felton, three others were also charged of being involved in the deceitful project. Felton’s projects included a digital streaming platform, FLiK, and a crypto exchange, CoinSpark.

The SEC accused Tip of endorsing FLiK via social media by selling FLiK tokens while urging people to invest in the fraudulent ICO. The rapper did so by claiming to be the co-owner of FLiK. This was reportedly carried out by the rapper’s social media manager, William Sparks, Jr.

As a penalty, the SEC required T.I. steer clear of any crypto securities offerings or sales for the next five years along with a civil monetary penalty of $75,000. Even though a lawsuit alleged that prominent comedian, Kevin Hart was part of the scammy ICO, the SEC did not press charges.

The other two involved in the case, Chance White and Owen Smith were charged for endorsing SPARK tokens “without disclosing they were promised compensation in return.” Both Smith and White were required to pay a total of $25,000 each. The individuals were also refrained from engaging in activities pertaining to digital assets like issuance, offering, purchase, or sale.

Elaborating on the amenities for investors, Associate Director in the Division of Enforcement, Carolyn M. Welshhans said,

“The federal securities laws provide the same protections to investors in digital asset securities as they do to investors in more traditional forms of securities

While Felton promised his investors that he would roll out FLiK as well as CoinSpark and raised funds via the ICO, he instead garnered a whopping $2.2 million as profits by selling FLiK tokens in the market. Felton reportedly transferred the tokens to himself before selling them off and even attempted to inflate the price of SPARK tokens by manipulative trading. The SEC further alleged that Felton purchased luxury goods including diamond jewelry, a million-dollar house, and a Ferrari with the acquired funds.

Welshhans further added,

“As alleged in the SEC’s complaint, Felton victimized investors through material misrepresentations, misappropriation of their funds, and manipulative trading.”

DeFi Bubble To Pop Sooner Than Expected, Says Messari’s Founder; DeFi’s Value Records Slump

by

Even though the Covid-19 pandemic disrupted almost every other industry, Decentralized Finance [DeFi] witnessed exponential growth over the last few months. As the fervor around DeFi grew stronger with time, several platforms were seen venturing into the space. While DeFi went about locking great value, prominent crypto influencers suggested that DeFi was a bubble in formation. However, Messari Crypto’s Founder, hinted that the bubble would pop sooner than expected.

DeFi Following ICO’s Footsteps?

Right after DeFi fell under the crypto spotlight, several scammy projects claiming to have high yields infiltrated the space. Elaborating on the same Ryan Selkis, the founder of the prominent crypto platform, Messari Crypto tweeted,

“We’re nearing the apex of ponzi economics, rug pulls, and “yield” hopping, and ETH fees are going to eat too heavily into non-whale profits.”

Back in 2017, ICOs took the crypto-verse by storm, and in the present-day DeFi seems to be following a similar trail. Selkis pointed out how people assumed that there would be “coordinating utility token for every industry” which led to the boom of ICO. However, he believes that DeFi is just a “big pool of capital” that has been sloshing about a group of people, mostly insiders as well as mercenaries. He added that these individuals would soon run out of people to “fleece”.

Over the last few months, the DeFi space had been consistently hitting new all-time highs in terms of the value locked. DeFi even went on to lock a high of $9.605 billion. However, soon after this, the value of the industry came crashing down to $6.116 billion. During the time of writing, the total value locked in DeFi was at $7.65 billion.

Capture 7

Selkis further highlighted that he stood by the “if it looks too good to be true, it is” rule and suggested,

“That’s 50% APY yields and greater fool investing in a nutshell. A better way to play DeFi may be to own a couple of blue chips, and forget about them for 3-5 years.”

Additionally, he asserted that even though he loves the “experimentation”  he wouldn’t endorse DeFi to a lot of people as he doesn’t recommend “high-stakes vegas poker to fish.”

Blockstream’s Adam Back shared similar thoughts as he had previously suggested that DeFi was a bubble in the making.

Discovery Science Rolls Out New Crypto and Blockchain Documentary

by

A new cryptocurrency documentary named  “Open Source Money” was recently premiered on the Discovery Science channel and continues to broadcast weekly episodes. The new cryptocurrency documentary series provides an in-depth analysis of what the cryptocurrency ecosystem is and tells the story of Dragonchain, a US-based blockchain technology firm.

Crypto and Blockchain documentary shares rich insights

The docuseries are based around an initial coin offering ( ICO) called Dragonchain. Dragonchain Network was created by the branch of the Walt Disney Company in Seattle back in 2014. Yet in 2016, the blockchain project and Walt Disney opted for cut-off ties. The episode follows Joe Roets, the founder of Dragonchain and entrepreneurs across the U.S. who face tremendous opposition from the U.S. government and SEC as they seek to progress in the cryptocurrency industry.

 

The episodes will also highlight major contributors to the cryptocurrency revolution when telling the Dragonchain ‘s journey. Perianne Boring, the founder of the Chamber of Digital Commerce, Alex Mashinsky of the Celsius Network, the infamous John McAfee; also feature special appearances in the documentary

Open Source Money is directed by J.D. Seraphine and Executive produced by   Vision Tree Media. This is the first series to be entirely financed with a budget of $1 million by cryptocurrencies. Open Source Money is directed by J.D. Seraphine and Executive produced by   Vision Tree Media. This is the first series to be entirely financed with a budget of $1 million by cryptocurrency. Notably, the company managed to raise $1 million in funding to drive the filming process through a variety of cryptocurrencies.

“Each episode highlights major contributors in the cryptocurrency revolution, including notable figures Patrick Byrne, Brock Pierce, Joe Roets, and companies the likes of Disney, Facebook, and more,”  said the Open Source Money website.

In conclusion, the 5-part documentary series focuses on the current regulatory stance on cryptocurrencies in the United States. “Open Source Money” will be broadcast on the Discovery Science channel and Philo at 10 a.m. ET every Saturday until the final episode.

Co-founder of Centra Tech Crypto Firm Pleads Guilty to ICO Fraud Promoted by Mayweather and DJ Khaled

by

The crypto founder of Centra Tech crypto firm, Robert Joseph Farkas, also known as “RJ,” pleaded guilty on 16 June on charges of conspiracy to commit securities and wire fraud. The 2017 ICO fraud was promoted by celebrities such as the Floyd Mayweather boxing icon and the DJ Khaled music producer.

According to a press release published by the Department of Justice, crypto founder Robert Farkas pleaded guilty to conspiracy to commit securities and wire fraud in connection with a dubious cryptocurrency project that hoodwinked investors up to $25 million.

Farkas, along with his team, used false information and data omission to lure investors to purchase securities in the form of tokens issued by Centra Tech. The tokens were distributed in the form of an Initial Coin Offering ( ICO) in early July 2017.

Co-founder of Centra Tech crypto firm lied to investors

Centra Tech was one of the many startups that took advantage of the ICO boom in 2017. After promising investors that the funds would develop a range of financial products for the digital economy, the firm distributed unregistered CTR tokens.

The co-founder of Centra Tech Crypto and his team also lied to investors about the firm’s partnership with some of the world’s leading financial services companies. For example, investors were once told that the firm had reached an agreement with Visa and MasterCard; to develop a Centra Fiat-to-Crypt card that would facilitate an instant conversion. The two companies, however, denied the claims.

Celebrity endorsements

Nevertheless, the most effective weapon in their arsenal was the endorsement by international icons such as boxing champion Floyd Mayweather and popular hip hop and record producer DJ Khaled. Mayweather and Khaled urged their fans to invest in Centra Tech; leading to a successful ICO that ran between July 2017 and March 2018.

Furthermore, investors also sued the two celebrities for infringing securities regulations; however, a federal court discharged them from the case in May 2019. In the case of Farkas, he will pass judgment on a date that will be determined. He could face a ten years prison sentence.

SEC Orders BitClave to Pay Back its Customers as Regulatory Body Makes Decision on 2017 ICO

by

Regulatory bodies have also kept a close eye on companies involved in the cryptocurrency industry. The main reason for this was the lack of legal clarification and the growing number of fraudulent activities in the region.

Another cryptocurrency organization was recently put to the sword when BitClave, a California-based startup, was paying all its customers back to the US Securities and Exchange Commission [SEC]. Charges were filed against BitClave for conducting an unregistered ICO back in 2017.

BitClaive’s first shot to fame when it raised over $25 million from more than 9,500 investors before the Bitcoin bull ran three years ago. Once the SEC clamped down on the Ethereum-based search engine, things moved pretty quickly to the legal front. BitClave neither confirmed nor denied the illicit aspects of the ICO and agreed to comply with SEC’s orders.

According to the SEC, BitClave will pay back all its customers through a Fair Fund established just for this purpose. The startup had raised the vast capital by selling its native Consumer Activity Token or CAT. The investors were told that BitClave would use the money to develop, administer, and market a “blockchain-based search platform for targeted consumer advertising. A release from the SEC said:

“ BitClave emphasized its expectation that the tokens would increase in value, and took steps to make the tokens available for trading on third-party digital asset trading platforms after the ICO.  The order finds that BitClave failed to register their offers and sales of CAT, which constituted securities.  CAT has since been removed from many of the third-party trading platforms, and BitClave is currently winding down its operations and does not plan to continue developing or supporting the platform. “

Kristina Littman, the Chief of the SEC Enforcement Division’s Cyber Unit added that all issuers of securities must follow the rules charted down by the federal body. The SEC also reiterated its mission to protect the people and their assets at all costs.  The SEC pointed out that CAT tokens were indeed investment contracts because of what was mentioned in the token’s whitepaper.

The CAT whitepaper had told users that as more service providers join the platform, the value of CAT tokens would appreciate. As it stands, the SEC has ordered BitClave to transfer 1.32 billion uncirculated CAT tokens so that they can be taken off the markets. Almost all major cryptocurrency exchanges have removed the token from their platforms, save a few that is expected to follow suit soon.