As an expensive "slap on the wrist," the Securities
and Exchange Commission ("SEC" or the
"Commission") recently concluded that approximately $12.7
million worth of funds raised in a 2017 Initial Coin Offering
("ICO") by Gladius Network LLC ("Gladius") were
part of an unregistered securities offering, and all proceeds must
be returned to investors. However, the penalty to Gladius for their
regulatory violations was zero.
In recent years, the SEC has brought a number of actions
involving offerings of digital asset securities including ICOs.
These actions have principally focused on two important questions.
First, the SEC examines when is a digital asset a
"security" for purposes of the federal securities laws,
and if the digital asset is a "security," the SEC
examines what registration requirements apply, if any. After the
Commission warned in its Decentralized Autonomous Organization
(DAO) Report of Investigation that ICOs can be securities
offerings, Gladius raised