California Law Firm Provides Legal Counsel to Crypto Users – The Merkle

bitcoinlawCryptocurrency enthusiasts are susceptible to losing funds in many different ways. Aside from human error, there are risks posed by failed ICOs, hacked exchanges, or other calamities. Taylor-Copeland Law is one of the first law firms specializing in these issues. We may be witnessing the creation of a new niche within the legal system as we know it today.

FOCUSING ON EXCHANGES AND ICO MISHAPS

It was only a matter of time until law firms started paying attention to cryptocurrency. Especially with all the issues arising over the past few years, there is a booming market for all companies specializing in cryptocurrency. With so many exchanges getting hacked, disappearing, or failing to provide optimal services, a lot of users are often left frustrated.

Moreover, the initial coin offering industry poses several major risks to consumer funds. No one knows for sure if any given ICO project is legitimate or how things will play out once money has been raised. The Tezos ICO is a good example of how things can go awry pretty quickly if problems aren’t addressed in a timely manner. However, there has often been no legal repercussions for exchanges or ICO teams that fail to deliver on their original promises.

That situation is finally changing, thanks to law firms such as Taylor-Copeland Law. The company has a dedicated page on its website explaining how blockchain technologies and cryptocurrencies will have an impact on our daily lives. However, with the regulatory and legal framework still making it difficult for businesses and individuals to comply with the law, something will need to change.

Furthermore, the company also provides services relating to initial coin offerings. A lot of investors are harmed by projects and teams which misrepresent their projects and intentions before or during their crowd sales. There need to be legal remedies in this regard as well, which is what this firm aims to provide. Additionally, they focus on the taxation of crypto investment gains and help companies check all the right legal boxes before they decide to organize an ICO.

It is expected that we will see even more law firms focus on these specific areas in the near future. There is a growing contingent of cryptocurrency users who will require legal counsel at one point or another. Whether or not all cryptocurrency users will decide to pursue that option is something else entirely. A lot of users may be somewhat ashamed to admit they were victims of an exchange mishap or a malicious ICO project.

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Ten Successful ICOs and Three ICO Scams

The recent proliferation of companies using the ICO or Initial Coin Offering to raise funds has seen it’s share of successes since 2016 and it’s a great way for companies to raise funds without the restrictive and costly regulatory compliance issues associated with other fundraising vehicles such as Regulation Crowd Funding or IPO’s (Initial Public Offering). According to The Merkle online journal the top ten ICO’s in 2017 to date are:

 

10. MONETHA

Although this project was only launched a short while ago, the amount of money raised surprised a lot of people. Monetha aims to provide a globally trusted commerce solution powered by the Ethereum blockchain to merchants in all industries. By raising US$36.6 million during the crowdsale, the ICO showed that people have high expectations for this project moving forward.

9. AETERNITY

Bringing smart contract technology to the masses will not be easy by any stretch of the imagination. Aeternity aims to do exactly that by making smart contracts interface with real-world data.  Whether or not the company will be successful in doing so remains to be seen. However, with US$36.96 million raised during the ICO, there are plenty of reasons to be optimistic about this concept.

8. SONM

The world of supercomputing can benefit from more decentralization. Although SONM is competing against other projects in this industry, it also has a tremendous amount of potential. Its ICO raised US$42 million, which is a modest amount compared to how highly-valued this project can become, given enough time. There is not much hype surrounding SONM, as the team mainly focuses on developing a working ecosystem rather than making empty promises.

7. MOBILEGO

One of the more fascinating projects to date goes by the name of MobileGO. Bringing the world of cryptocurrency and mobile gaming together is quite a major undertaking. However, the project has seen its fair share of successes so far. This also explains how it raised US$53.069 million during its initial crowdsale. It’s definitely a project worth keeping an eye on moving forward.

6. TENX

In the world of cryptocurrency-related debit cards, one can never have enough competition. TenX is one of the ICO projects launching in 2017 which aims to make a big impact in this regard. By raising US$64 million during the ICO, there has been a lot of initial interest in this project. However, that amount of money is no guarantee for success whatsoever.

5. STATUS

Many people will recall the Status ICO for the wrong reasons. It’s not because the project is bad, as some real progress has been made. Unfortunately, the Status ICO highlighted major scalability issues for the Ethereum network, which got stuck due to the number of people trying to invest. When everything was said and done, Status raised US$90 million rather quickly.

4. BANCOR

The Bancor ICO has received a lot of initial interest due to the involvement of Tim Draper. This project is also one of those ICOs which sold out very quickly, for obvious reasons. Raising US$153 million is not shabby. It will be interesting to see what the team will do with this money, as the expectations of them are incredibly high.

3. EOS (STAGE 1)

The EOS project has turned a lot of heads even though no one knows for sure if the team can deliver on its promises. There is a lot of interest in the concept, though, which has already translated into successfully raising US$185 million during its ICO. Putting that money to good use will be the number one priority right now.

2. TEZOS

Creating a decentralized blockchain capable of governing itself through a digital commonwealth sounds pretty interesting on paper. Bringing this technology to the masses will be something else entirely, though. Tezos successfully raised US$232.319 million to bring this blockchain to fruition. Whether or not the product will succeed in the end still remains to be determined.

1. FILECOIN

A lot of people were legitimately surprised by the Filecoin ICO, for obvious reasons. This project raised US$257 million out of the blue, even though the concept appears to be solid. A decentralized file storage network will certainly have major implications. Users will also earn Filecoin for hosting files, which is something a lot of enthusiasts will look forward to

These are some of the success stories to date, however, there have been many ICO’s that took advantage of the unregulated investment vehicle and The Securities & Exchange Commission (SEC) issued several stern warnings to investors about the dangers and risks involved with ICOs although they have yet to issue any regulations I am confident that they are forthcoming. China and South Korea both issued total bans on  ICO’s until they can come up with some regulations while the United States has issued several warnings and has stated that they may pursue enforcement actions retroactively against any ICO’s that are done prior to whatever regulations they may come out with in the future. The Merkel recently published the following three ICOs as being obvious scams:

3) OPAIR

The Opair ICO was one of the earliest noted scams in ICO history happening back in 2016. They raised more than $1M with the promise of decentralized debit cards.

It should have been pretty obvious from the start, that a no-name group of individuals could not overhaul the banking system and provide decentralized debit cards that would work anywhere right off the bat, but with more and more exciting new Blockchain technology hitting the markets, people were hopeful.

Things started to unravel when users pointed out that the Opair team seemed to have fake LinkedIn profiles, and despite providing tons of personal information and pictures, refused to attend events or go on video calls for “privacy reasons.”

Not long after the Opair token was listed on exchanges, lots of coins were rapidly dumped, the main website was taken offline and the team went silent.

Sleuths on Bitcointalk.org later realized that the conman behind the Opair later launched at least one other scam ICO known as EBITZ (a Zcash clone) as the scammer use some of the same server DNS records for the new website.

2) BITCAD

There is still a bit of debate about BitCad, if it was a downright scam or if it was just a failed attempt at something larger. But, none the less a lot of people lost a lot of money.

BitCad raised $5M promising to be, well, everything. The BitCad ICO project aimed at replacing nearly every component of modern business, government, trading and transaction facilitation and gave very few insights into how they were going to make this happen.

While at first, they boasted a pretty large team, after the ICO team members started to depart the team quite rapidly, and announcements from the team ground to a halt.

The team was supposed to deliver the first component of the platform back in May 2017, that included a smart contract constructor and biometric verification, by October 2017 they were also supposed to launch a dispute resolution department, a multistakeholder token model, and a decentralized trade engine. None of which have been launched yet.

People are still holding their breath hoping for signs of life in the BitCad platform, but this is another ICO where they were either being sold snake oil or a team took on a project that was way over their heads.

1) AUTHORSHIP

Authorship was an ERC20 token that raised $1M with the promise of creating a system for writers, translators, and journalists to earn and exchange ATS tokens for their works.

Participants should have been skeptical when the tokens creators mentioned the desire to build out this token from their experience running the bookstore: http://www.ireadbooks.org/ – it doesn’t take a rocket scientist to realize that the terrible e-commerce website that only sells pencils and blank notebooks isn’t much of a “bookstore.”

They also listed their address as “11015 York Road Cockeysville Maryland” which is the home of an entirely unrelated ‘Precision Auto Mechanics” business which seems to have no relation to the coin creators.

What really did in Authorship though was their failure to distribute tokens from the bounty and referral programs. It wasn’t until then that users realized they had been scammed and started digging into the addresses above.

Arguably had Authorship distributed the tokens, we may have categorized this just as a failed attempt at an ICO rather than a downright scam.

SEC reveals it was hacked, information may have been used for illegal stock trades – The Washington Post

The Securities and Exchange Commission, the country’s top Wall Street regulator, announced Wednesday that hackers breached its system for storing documents filed by publicly traded companies last year, potentially accessing data that allowed the intruders to make an illegal profit.

The agency detected the breach last year, but didn’t learn until last month that it could have been used for improper trading. The incident was briefly mentioned in an unusual eight-page statement on cybersecurity released by SEC Chairman Jay Clayton late Wednesday. The statement didn’t explain the delay in the announcement, the exact date the system was breached and whether information about any specific company was targeted.

“Notwithstanding our efforts to protect our systems and manage cybersecurity risk, in certain cases cyber threat actors have managed to access or misuse our systems,” Clayton said in the statement.

Source: SEC reveals it was hacked, information may have been used for illegal stock trades – The Washington Post

SEC Warns of ICO Schemes After Suspending 4 Firms – Bitcoin News

The U.S. Securities and Exchange Commission (SEC) has issued a warning about companies making Initial Coin Offering (ICO) claims. It warns of schemes including pump-and-dump and market manipulation as well as points out how companies may use ICOs to boost their stock prices. The warning follows the trading suspension of four companies’ shares by the Commission.

Also read: SEC Suspends Trading of Bitcoin Firm’s Shares After 7000% Price Jump

SEC’s Warning

The SEC’s Office of Investor Education and Advocacy on Monday issued a warning to investors “about potential scams involving stock of companies claiming to be related to, or asserting they are engaging in, Initial Coin Offerings (or ICOs).” The Commission wrote:

These frauds include ‘pump-and-dump’ and market manipulation schemes involving publicly traded companies that claim to provide exposure to these new technologies.

SEC Warns of ICO Schemes After Suspending 4 Firms“There may be situations in which companies are publicly announcing ICO or coin/token related events to affect the price of the company’s common stock,” the SEC detailed. Therefore, the trading of such stocks may be suspended “to protect investors and the public interest,” the agency added.

Some circumstances that could lead to the suspension of trading include a lack of current, accurate, and adequate information about the company. In addition, questions about the accuracy of publicly available information as well as insider trading and potential market manipulation can also lead to trading suspensions.

4 Recent Trading Suspensions

The SEC also revealed on Monday that it has recently suspended the trading of four companies’ shares for making “claims regarding their investments in ICOs or touted coin/token related news.” The four companies are First Bitcoin Capital Corp., Ciao Group, Strategic Global, and Sunshine Capital.

SEC Warns of ICO Schemes After Suspending 4 FirmsFirst Bitcoin Capital Corp
News.Bitcoin.com recently reported on the suspension of First Bitcoin Capital Corp’s shares after they rose almost 7000%. In July, the company announced that its subsidiary Coinqx Exchange Ltd acquired tokens called “the Internet of Money” which would eventually trade under the symbol XOM. The company says that it would allow a buyback at a set rate of 2 shares for 1 XOM token.

Ciao Group Inc
Ciao Group, which has changed its name to Numelo Technology, had planned an ICO for later this year. However, the SEC suspended the trading of the company’s shares on OTC Markets from August 10 to 23. The shares still have not resumed trading at press time.

Strategic Global Investments Inc
SEC Warns of ICO Schemes After Suspending 4 FirmsStrategic Global Investments revealed in July that it intends to sponsor over 60 Counterparty cryptocurrencies which it claims are fully SEC compliant. The first one will be the tokenized asset Troptions, expected this fall. However, the SEC suspended the trading of the company’s shares from August 4 to 17, and the U.S. Financial Industry Regulatory Authority (FINRA) also independently requested some information from the company. Its shares have not resumed trading at press time.

Sunshine Capital Inc
Sunshine Capital’s shares were suspended from trading from April 12 to 26, due to questions about “the liquidity and value of the company’s assets, namely Dibcoins.” A few days after the suspension, the company was converted into a private one. Its shares have not resumed trading press time.

ICOs Subject to Federal Securities Laws

In July, the SEC declared in a report that Dao tokens are securities and ICOs are subject to federal securities laws. However, soon afterward, 20 new ICOs were reportedly announced.

Nonetheless, the SEC’s warnings were not ignored. A number of cryptocurrency exchanges responded by reviewing their listings and policies. Bitfinex, for example, announced its exit from the U.S. Market, citing the strict regulatory environment. “Bitfinex is taking the proactive step of barring U.S. customers from trading certain digital tokens that may be deemed securities in the eyes of the SEC,” the exchange noted.

Shapeshift announced that “in light of the SEC’s statements, we will need to adapt our service offering to ensure it’s not mischaracterized as a ‘securities exchange’, adding that “we may need to delist some types of tokens from the platform.” Poloniex responded by stating that “as part of our compliance processes, we periodically assess listed tokens, and some may end up delisted as a result.”

Source: SEC Warns of ICO Schemes After Suspending 4 Firms – Bitcoin News

‘Bitcoin Regulation Act’ Introduced in South Korea Bans MLMs – Bitcoin News

‘Bitcoin Regulation Act’ Introduced

'Bitcoin Regulation Act' Introduced in South Korea
Rep. Park Yongjin

Korean Democratic Party lawmaker Park Yong-jin announced last week that he has introduced an amendment for the Electronic Financial Transaction Act. Its main purpose is to create a regulatory framework for digital currencies in order to “maintain healthy market order and protect users,” Inews24 reported. Business Korea calls this amendment the “Bitcoin Regulation Act.”

“As interests in virtual currencies such as bitcoin and ethereum have soared,” Park said “there is no clear definition of virtual currencies or restrictions on those who can sell virtual currencies.” He first announced that he would introduce this legislation back in July. Business Korea wrote:

The Bitcoin Regulation Act is scheduled for a regular session of the National Assembly in September with a growing debate foreseen.

Definitions and Classifications

'Bitcoin Regulation Act' Introduced in South KoreaIn this amendment, virtual currency is defined as “an instrument of exchange or an electronic store of value,” reported Inews24. It also distinguishes virtual currency from “real” currency. The amendment proposes five classifications of digital currency handlers with the following definitions.

  • “Virtual currency traders” – those selling goods or services in exchange for digital currency.
  • “Virtual currency dealers” – those operating a market for the sale of virtual currencies such as exchanges.
  • “Virtual currency brokers” – those intermediating or arranging the sale of digital currency.
  • “Virtual currency issuers” – those offering systems to create and issue digital currencies, and
  • “Virtual currency managers” – those storing or managing digital currencies for others.

Requirements and Prohibited Activities

The revised legislation requires all digital currency handlers “to have 500 million won or more in capital and receive approval from the Financial Supervisory Commission,” detailed Business Korea.

'Bitcoin Regulation Act' Introduced in South KoreaThe amendment also mandates customer funds be deposited at a separate institution with insurance, or some form of payment guarantee in order to protect customers, the publication added.

The legislation prohibits several specific digital currency-related activities such as their sale and brokering through door-to-door and multi-level marketing schemes. It also strictly prohibits illegal acts involving digital currencies, such as market price manipulation and money laundering. Violations can carry a prison sentence of up to five years or a fine of up to 50 million won, Business Korea detailed.

Source: ‘Bitcoin Regulation Act’ Introduced in South Korea Bans MLMs – Bitcoin News

SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities

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U.S. Securities Laws May Apply to Offers, Sales, and Trading of Interests in Virtual Organizations

FOR IMMEDIATE RELEASE
2017-131

Washington D.C., July 25, 2017—

The Securities and Exchange Commission issued an investigative report today cautioning market participants that offers and sales of digital assets by “virtual” organizations are subject to the requirements of the federal securities laws. Such offers and sales, conducted by organizations using distributed ledger or blockchain technology, have been referred to, among other things, as “Initial Coin Offerings” or “Token Sales.” Whether a particular investment transaction involves the offer or sale of a security – regardless of the terminology or technology used – will depend on the facts and circumstances, including the economic realities of the transaction.

The SEC’s Report of Investigation found that tokens offered and sold by a “virtual” organization known as “The DAO” were securities and therefore subject to the federal securities laws. The Report confirms that issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies. Those participating in unregistered offerings also may be liable for violations of the securities laws. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt. The purpose of the registration provisions of the federal securities laws is to ensure that investors are sold investments that include all the proper disclosures and are subject to regulatory scrutiny for investors’ protection.

“The SEC is studying the effects of distributed ledger and other innovative technologies and encourages market participants to engage with us,” said SEC Chairman Jay Clayton. “We seek to foster innovative and beneficial ways to raise capital, while ensuring – first and foremost – that investors and our markets are protected.”

“Investors need the essential facts behind any investment opportunity so they can make fully informed decisions, and today’s Report confirms that sponsors of offerings conducted through the use of distributed ledger or blockchain technology must comply with the securities laws,” said William Hinman, Director of the Division of Corporation Finance.

The SEC’s Report stems from an inquiry that the agency’s Enforcement Division launched into whether The DAO and associated entities and individuals violated federal securities laws with unregistered offers and sales of DAO Tokens in exchange for “Ether,” a virtual currency. The DAO has been described as a “crowdfunding contract” but it would not have met the requirements of the Regulation Crowdfunding exemption because, among other things, it was not a broker-dealer or a funding portal registered with the SEC and the Financial Industry Regulatory Authority.

“The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.

Steven Peikin, Co-Director of the Enforcement Division added, “As the evolution of technology continues to influence how businesses operate and raise capital, market participants must remain cognizant of the application of the federal securities laws.”

In light of the facts and circumstances, the agency has decided not to bring charges in this instance, or make findings of violations in the Report, but rather to caution the industry and market participants:  the federal securities laws apply to those who offer and sell securities in the United States, regardless whether the issuing entity is a traditional company or a decentralized autonomous organization, regardless whether those securities are purchased using U.S. dollars or virtual currencies, and regardless whether they are distributed in certificated form or through distributed ledger technology.

The SEC’s Office of Investor Education and Advocacy today issued an investor bulletin educating investors about ICOs. As discussed in the Report, virtual coins or tokens may be securities and subject to the federal securities laws. The federal securities laws provide disclosure requirements and other important protections of which investors should be aware. In addition, the bulletin reminds investors of red flags of investment fraud, and that new technologies may be used to perpetrate investment schemes that may not comply with the federal securities laws.

The SEC’s investigation in this matter was conducted in the New York office by members of the SEC’s Distributed Ledger Technology Working Group (DLTWG) — Pamela Sawhney, Daphna A. Waxman, and Valerie A. Szczepanik, who heads the DLTWG — with assistance from others in the agency’s Divisions of Corporation Finance, Trading and Markets, and Investment Management. The investigation was supervised by Lara Shalov Mehraban.

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