Steven Peikin, co-director of the enforcement division of the U.S. Securities and Exchange Commission (SEC), recently described international cooperation as playing a critical role in facilitating investigations in the initial coin offering (ICO) sector.
‘Daunting Task’ of Identifying Misconduct
Speaking at Harvard Law School, Peikin described the SEC’s enforcement division as having the “daunting task of ferreting out misconduct and, where appropriate, recommending civil enforcement actions that variously seek injunctions or cease-and-desist orders, penalties, disgorgement of ill-gotten gains, suspensions and bars of bad actors, and the temporary suspension or delisting of securities.”
Peikin stated that collaboration with international regulators is “critical” to the SEC’s ability to investigate and take action against ICOs. The operators of ICOs are typically located outside of the U.S. and raise funds from “a broad base of investors both inside and outside the U.S.”
Quebec Regulator Played Key Role in Plexcoin Case
Peikin said that the SEC generally sees two types of securities law violations from token offerings.
“First, we see ICOs that meet the definition of a security, but are being sold, brokered, or traded to U.S. investors without complying with the registration requirements of the federal securities laws. Second, we see ICOs that appear to be simply outright frauds — where the issuers are using excitement around the crypto-asset space to simply rip off money from investors,” he said.
Peikin stated that the international assistance received by the SEC in regulating the ICO sphere has been “essential.” As an example, he noted how cooperation with the Autorité des marchés financiers in the Canadian province of Quebec led to the SEC charging two Canadian residents for their role in the fraudulent Plexcoin token sale.