This past Tuesday, the US Securities and Exchange Commission (SEC) announced that it has taken steps against two cryptocurrency companies. This will be the “first ever” action of this kind the SEC does for both firms. One of them is against a company which claims to offer the “first regulated crypto asset fund in the United States” and the other against an “ICO Superstore.”
On Tuesday, the SEC “announced its first-ever enforcement action finding an investment company registration violation by a hedge fund manager based on its investment in digital assets.” One of the firms being referred to is based in La Jolla, California, which aims its attention generally on managing investment portfolios of cryptocurrency and related assets.
The SEC detailed “The SEC entered an order finding that Crypto Asset Management LP (CAM) offered a fund that operated as an unregistered investment company while falsely marketing it as the ‘first regulated crypto asset fund in the United States’.” According to the order against CAM and its sole principal, which happens to be Timothy Enneking, the firm raised more than $3.6 million over a four-month period in late 2017 “while falsely claiming that the fund was regulated by the SEC and had filed a registration statement with the agency.”
After the firm was contacted by the commission, the firm “ceased its public offering and offered buybacks to affected investors.” The agency also noted that “CAM and Enneking agreed to the SEC’s cease-and-desist order and censure without admitting or denying the findings against them, and agreed to pay a penalty of $200,000.”
In addition to that, the SEC also took action against another crypto firm along with its two owners. Tokenlot LLC is a Michigan-based crypto firm which describes itself as an “ICO Superstore,” the commission noted. The agency also noted the names of the owners, namely Lenny Kugel and Eli L. Lewitt.
The agency claims “This is the SEC’s first case charging unregistered broker-dealers for selling digital tokens after the SEC issued The DAO Report in 2017 cautioning that those who offer and sell digital securities must comply with the federal securities laws.”
The SEC order details that Tokenlot operated from July last year to late February, “with most of its business occurring after The DAO Report on the applicability of securities laws of digital assets.” The company and its founders “promoted Tokenlot’s website as a way to purchase digital token during initial coin offerings (ICOs) and also to engage in secondary trading.” They obtained “orders from more than 6,100 retail investors and handled more than 200 different digital tokens, which the SEC found included securities,” the agency confirmed.
The co-director of the SEC’s Enforcement Division, Steven Peikin stated that the company and its founders promptly cooperated and “provided valuable information to Commission staff, stopped the conduct, and refunded money to investors.” Finally, the SEC noted that “Kugel and Lewitt also agreed to pay penalties of $45,000 each and agreed to industry and penny stock bars and an investment company prohibition with the right to reapply after three years.”