Last week, in remarks at an industry conference, Securities and Exchange Commission Enforcement Division Co-Head Stephanie Avakian described the SEC’s approach to Initial Coin Offering (ICO) enforcement as calibrated to avoid stifling innovation while sending a clear message that unregistered securities offerings and fraud would not be allowed.
She cited the Munchee ICO as an example of cooperation between the SEC and an issuer to address an unregistered offering, with the SEC halting the ICO before it was completed, Munchee returning proceeds to investors, and the SEC declining to seek a penalty.
“What Ms. Avakian did not say, but which is widely known in enforcement circles, is that SEC enforcement staff are being inundated with referrals relating to ICOs,” says O’Melveny White Collar partner Ben Singer, former Chief of the Department of Justice’s Securities & Financial Fraud Unit.
“This has placed pressure on an enforcement staff that has been reduced, in some offices, substantially, by a hiring freeze and is dealing with the highly technical nature of these new products. Nevertheless, Ms. Avakian’s remarks, which echo recent statements from SEC leadership, show that ICOs are a top priority for SEC enforcement for the foreseeable future.”
As Chief of the DOJ’s Securities & Financial Fraud Unit, Ben oversaw approximately 50 federal prosecutors investigating complex securities, commodities, and other corporate fraud and corruption offenses, including market manipulation, spoofing, insider trading, accounting fraud, procurement fraud, money laundering, environmental crimes, antitrust offenses, and bribery.