NEW YORK (Reuters) – Two Wall Street regulators announced a series of actions, including the imposition of fines, against companies involved with cryptocurrencies, in a burst of activity reflecting efforts to monitor the class of popular and unregulated activity.
A placard for the Financial Industry Regulatory Authority (FINRA) is seen outside the offices in the financial district of New York on July 22, 2015. REUTERS / Brendan McDermid / Photo of the file
The cryptocurrencies Like the well known bitcoins, they are virtual tokens that can be used as forms of payment on a variety of online applications. They can also be exchanged on dedicated online exchanges.
Securities regulators have stepped up control over the nascent asset class, noting that some tokens may be considered as securities, which would make their issuance, sale and negotiation subject to federal laws.
U.S .. President of the Exchange Securities and Exchange Grant, Jay Clayton, said in February that he believed that most of the sales of new tokens, known as initial coin offerings, should be considered securities. However, the SEC has not specifically classified which coins are securities.
A New York federal judge ruled on Tuesday that a case could proceed where the US Securities Act was used to prosecute fraud cases concerning cryptocurrency offers.
In the first of the three separate actions announced on Tuesday, the Regulatory Authority of the Financial Industry (FINRA) accused Timothy Ayre, owner of Rocky Mountain Ayre ( RMTN.PK ), of having committed fraud in securities after selling and marketing the HempCoin digital asset.
HempCoin was supported by parts of Rocky Mountain Ayre, but Ayre did not register the currency as a security, said FINRA. Between 2016 and 2017, investors extracted over 81 million hemp, which they traded with C-Cex and Yobit in the cryptocurrency trade.
Ayre may face a fine or suspension from the securities industry. Franklin Ogele, a lawyer representing Ayre, said they are planning to fight the allegations because it is not clear that Hempcoin can be considered a security.
The SEC separately on Tuesday said that TokenLot and its heads Lenny Kugel and Eli Lewitt agreed to pay $ 471,000 in disgorging more interests to resolve the charges that acted as an unregistered broker-dealer for the sale of digital tokens .
Kugel declined to comment on the agreement. Kugel, Lewitt and TokenLot did not admit or deny the SEC conclusions.
Lastly, the SEC said that the hedge fund Crypto Asset Management LP agreed to pay a fine of $ 200,000 after finding out that it offered a fund that, falsely, had been regulated by the SEC when it was not .
The fund and its manager Tim Enneking, who was also nominated in the order, did not admit or deny the SEC conclusions.
Enneking in a telephone interview said that the company has collaborated with the SEC and has removed two statements from its website as soon as the regulator has informed it of the problem .
"There is nothing in the order of financial irregularity, no investor has been damaged, and this has not had any impact on the operation or performance of the fund," Enneking said.
Reporting by Elizabeth Dilts and Anna Irrera in New York; Editing by Bill Berkrot and Matthew Lewis