SEC Stops Token Registration for Defective Disclosure
The SEC halted the effectiveness of two digital tokens because of information defects.
The respondent sought to register two digital tokens using Form 10 under Section 12 of the Exchange Act, which provides for automatic effectiveness. The SEC acted to stay the offering because the issuer failed to address SEC-cited information deficiencies including a lack of required financial information and statements, a beneficial ownership table, an executive compensation table, and exhibits. The issuer also claimed that the tokens were not securities even though Form 10 is a registration statement for securities. An SEC Enforcement official warned token sponsors: “Issuers attempting to raise money from the public must provide the information necessary for investors to make informed decisions.”
Crypto sponsors must decide (based on counsel’s advice) whether their tokens are securities subject to registration. Once you file a registration statement, you are essentially acknowledging that they are securities, subject to SEC review. At that point, the SEC has broad discretion about what disclosures to include.
Read SEC Order here.