A string of fines has been launched against blockchain organizations by regulatory authorities. On September 11th, three announcements were made about the actions taken against certain crypto-related companies. The most significant of these is FINRA’s introduction to the industry.
Finra fining blockchain organizations for non-compliance
The Financial Industry Regulatory Authority (FINRA) accused Timothy Eyre, the owner of Rocky Mountain Ayre (RMTN), of failing to register HempCoin as a security (HempCoin was backed by Rocky Mountain Ayre shares). FINRA is a non-governmental self-regulatory body that is overseen by the SEC and primarily deals with broker-dealers.
Between 2016 and 2017, over 81 million coins were mined and subsequently traded on the Yobit and C-Cex cryptocurrency exchanges. Ayre can potentially be fined, however, he intends to fight the charges because it is not clear the coins are securities. This is the first time that FINRA has taken action against a blockchain organization in a securities dispute. According to FINRA, Ayre is being prosecuted due to-
“making materially false statements and omissions regarding the nature of RMTN’s business, failing to disclose his creation and unlawful distribution of HempCoin, and making multiple false and misleading statements in RMTN’s financial statements.”
More regulatory crackdowns
Also announced on Tuesday was that Tokenlot owners Lenny Kugel and Eli Lewitt settled for USD 471,000 after failing to register as broker-dealers. Neither commented on the settlement. Crypto Asset Management LP, a hedge fund company, agreed to pay USD 200,000 after indicating that it was regulated by the SEC when it was not. According to fund manager Tim Enneking –
“There is nothing in the order about financial impropriety, no investors were harmed, and this has not impacted the fund’s operation or performance at all.”
The regulatory actions against the blockchain organizations take place in the middle of a Federal court ruling that cryptocurrencies can be deemed as securities, while previously federal courts deemed them as commodities. The ruling allows the SEC to prosecute an ICO where investors were potentially defrauded, their coins backed by nothing.
The SEC and FINRA finally appear to be regulating an industry that is beset with scams. It could be a necessary precursor to the eagerly anticipated bitcoin exchange-traded funds, which have been delayed on numerous occasions for various reasons. It is certainly a sign of legitimacy, but it also means that blockchain companies will have to be far more diligent moving forward.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.