Fundraisings accepted by the U.S. Securities and Exchange Commission (SEC) that were related to initial coin offerings (ICO) soared in 2018: According to a Marketwatch analysis, the agency accepted 287 of them last year with stated value of $8.7 billion compared to 44 the prior year with a stated value just over $2 billion.
In its research, the outlet queried the agency’s Edgar database for search terms like “ICO,” “token,” and “coin,” among others. It also said that promoters of ICOs were able to reach accredited investors via the agency’s Form D. While those notices are made for offerings that are exempt from the full registration criterion of the agency, only “accredited investors” can invest. In other words, investors have to have made more than $200,000 on an annual basis regularly or have a net worth that exceeds $1 million. And, in the case of a company, it has to have more than $5 million in assets to invest.
The news, however, comes a few months after the SEC Division of Enforcement said in its annual report last year that it brought enforcement actions upon more than a dozen initial coin offerings (ICOs) and in the fiscal year that ended September 30. In its report, the agency said, “in just a few years, the prevalence of crypto-asset offerings, including ICOs, has exploded. But exuberance around these markets can sometimes obscure the fact that these offerings are often high-risk investments.”
The division also said that issuers might not have viable products or business models as well as established track records. “Some of the offerings are simply outright frauds cloaked in the veneer of emerging technology,” the agency added. In addition, the division also said that its new cyber unit has helped it expand its focus on cyber-related misconduct. That is, “the Commission brought 20 standalone cases, including those cases involving ICOs and digital assets,” and by the end of the fiscal year, “the Division had more than 225 cyber-related investigations ongoing.”