U.S. regulators fine TokenLot LLC, a self described ‘ICO superstore’ and a hedge fund Crypto Asset Management LP (CAM) on the charges of operating as unregistered broker-dealers and investment company registration violation respectively.
Charging unregistered broker-dealers for selling digital tokens and registration violation by a hedge fund manager based on its investments in digital assets is a first of its kind case faced by the SEC.
According to SEC’s press release, in the first case, TokenLot, ‘the ICO superstore’, Lenny Kugel and Eli L. Lewitt, co-founders of TokenLot promoted TokenLot’s website as a way to purchase digital tokens during initial coin offerings (ICOs) and also to engage in secondary trading. TokenLot operated even after the enforcement of the DAO report which required TokenLot, Kugel, and Lewitt to be registered with the SEC as broker-dealers.
TokenLot received orders from more than 6000 investors and handled more than 200 different digital tokens, which the SEC found including securities. The business’s profits included trading profits and a percentage of the money that TokenLot raised for ICOs.
The press report also states that in response to the SEC’s investigation, TokenLot voluntarily began winding down and refunding investors’ payments for unfilled orders. TokenLot, Kugel, and Lewitt were also charged with violating the registration provisions in connection with their conduct.
Without admitting allegations, TokenLot has agreed to pay $478,929 including interest and it will retain an independent third party to destroy its remaining inventory of digital assets. The co-founders both have agreed to pay penalties of $45,000 each and have agreed to industry, penny stock bars and an investment company prohibition with the right to reapply after three years.
TokenLot said goodbye to its customers on 31st July. The goodbye message on their website sticks ‘the ever changing regulatory landscape’ for the discontinuation of their services.
In the other case, the SEC entered an order finding that Crypto Asset Management LP (CAM) offered a fund that operated as an unregistered investment company while falsely marketing it as the “first regulated crypto asset fund in the United States.”
According to the SEC’s order, Timothy Enneking, the hedge fund manager, raised more than $3.6 million over a four-month period in late 2017 while falsely claiming that the fund was regulated by the SEC and had filed a registration statement with the agency.
CAM and Enneking agreed to the SEC’s cease-and-desist order and censure without admitting or denying the findings against them, and agreed to pay a penalty of $200,000.
Comes out that the ‘dump it’ horn sounded by the investor circles soon after the ruling came has been completely run over as almost all the cryptocurrencies are showing a positive trend in the past 24h.