Recent Development In Regulatory Enforcement Of Digital Securities

In a flurry of activity and confluence of developments, the SEC, FINRA and a Brooklyn federal judge have commenced actions and made rulings that continue to define the regulatory framework and obligations surrounding the sale and trading of digital securities, whether they are labeled as cryptocurrencies or tokens.

SEC Cease and Desist Order

On Tuesday, September 11, 2018, the Securities and Exchange Commission entered its first Administrative Order against a hedge fund manager that invested in digital assets, or cryptocurrencies, claiming that he violated the Securities Act of 1933 and the Investment Company Act of 1940 by failing to register with the SEC, and the Investment Advisers Act of 1940, which makes it unlawful for any investment adviser to a pooled investment vehicle to make any untrue statement of a material fact or to omit to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not