- The SEC has accused American Cryptofed of providing misleading information in its filings of token offerings.
- The Wyoming-based organization accused the SEC of refusing to communicate on the matter.
On Wednesday, November 10, the U.S. Securities and Exchange Commission (SEC) blocked the registration of two digital tokens offered by the Wyoming-based American Cryptofed. The securities regulator has accused the company of providing misleading information to investors in its filings.
In the filing, the Wyoming-based American Cryptofed said that its mission is “to create and maintain a monetary system with zero inflation, zero deflation and zero transaction costs”. The organization further added that its Ducat tokens offer inflation protection through an algorithm that creates and destroys Ducats.
In the filing, the American Cryptofed has proposed registering Ducat along with an accompanying token Locke, as securities. However, Cryptofed said that it wanted to register them as “utility tokens” instead of securities.
In its latest rejection, the U.S. SEC noted that the American Cryptofed failed in reporting the required information about the two tokens. Besides, the Wyoming-based organization didn’t submit its “business, management, and financial condition, including audited financial statements.”
In its recent statement, Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit said:
Issuers attempting to raise money from the public must provide the information necessary for investors to make informed decisions. We allege American CryptoFed made materially misleading statements and failed to provide legally required information in its registration form.
SEC orders for administrative proceedings
The SEC said that it will order administrative proceedings to determine any appropriate action required for investor protection. The regulator said that it will further decide to deny or suspend the date of registration for Ducat and Locke tokens.
American Cryptofed Chief Executive Officer Marian Orr has, however, refused to agree with the SEC. She noted that the company has been trying to discuss the matter with the SEC but the regulator refused to respond to the October rebuttal. In a statement, the American Cryptofed CEO said:
The purported ‘deficiencies’ the SEC referred to were the lack of attributes inherent to securities. These are attributes that the two tokens (Locke and Ducat) of a decentralized blockchain-based CryptoFed DAO monetary system will never have.
The recent development shows that the U.S. SEC continues to take a tough stand on crypto offerings taking place in the country. SEC Chairman Gary Gensler said that they will be having a closer look at the developments in the rapidly expanding crypto market. Previously, the SEC Chairman has also referred to the crypto world as the “Wild West” riddled with fraud and investor risk.
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