Is the ICO Party Over?

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Katherine Wu - November 20, 2018

(Reminder before reading another word, that I am not an attorney, and most definitely not your attorney.)

The SEC has had an active month. It kicked off November with an enforcement action against the founder of a decentralized exchange, EtherDelta, and followed up on Friday with two more jabs against Airfox and Paragon, two tokens who completed sales in late 2017 “after the SEC’s DAO report.” And then the final upper cut dropped: a statement on digital asset securities issuance and trading.

The details of what happened in those cases are well covered online by many legal commentators in the crypto space (some good ones here, here, and here), but the gist is that Airfox and Paragon conducted ICOs in which they a) sold tokens b) at a discount to early private investors, c) to fund the build-out of their products, and d) which had no use at the time of sales. And the companies did not register those token sales as securities with the SEC.

Nothing super surprising. Both token sales pushed the securities law envelope hard.

It was the SEC’s full statement and takeaways later in the day, however, that are worth spending time dissecting.