In the United States, a growing number of orders and laws have begun to emerge that prohibit the activities of companies that conduct their cryptobusinesses without obtaining a U.S. cryptoboarding license. Nowadays, businessmen are interested in obtaining a license for cryptography in the USA and registering a company for cryptography in the USA.
Most recently, on August 26, 2019, the U.S. Securities and Exchange Commission issued two orders to terminate the supply, sale and marketing of unregistered tokens.
Why it is important to obtain a license for cryptodidactic activity in the USA?
Obtaining a U.S. crypto-exchange license is necessary to avoid repeating the experience of SimplyVital Health, Inc. (SimplyVital). The firm violated U.S. law by not obtaining a crypto-exchange license in the United States.
First order of the US Securities and Exchange Commission
In the first SV Order of the U.S. Securities and Exchange Commission, SimplyVital, which issued the “health-related blockchain ecosystem,” was found to have violated the Securities Act of 1933 by failing to register its initial token offer (ICO), which is a failure to obtain a U.S. cryptocurrency license.
As part of the development of the Health Nexus blockchain ecosystem, SimplyVital planned to raise capital by selling its own HLTH token through a “pre-sale” and public ICO. The company’s legal counsel prepared a memorandum of proposal stating that SimplyVital sought to rely on Section 4(a)(2) of the Securities Act and Rule D or Rule S to secure ICO to offer and sell HLTH tokens. During the pre-sale preparation, the participants paid SimplyVital Ether in exchange for the right to receive the HLTH token after issue under a simple investment contract for future tokens (SAFT). By mid-2018, SimplyVital had collected an amount equivalent to $6.3 million, mainly from individuals and ICO investments, which are “groups of investors who have pooled their money to jointly satisfy the investment minimum of a token or coin issuer and to take advantage of discounts offered to pre-selling investors”.
The first order states that although SimplyVital was aware of the participation of ICO’s pools in the pre-sale preparation, “SimplyVital did not take reasonable steps to verify that the buyers of the securities sold as part of the pre-sale offer were accredited investors”.
As a result, HLTH’s pre-sale preparation (the recognized offer of securities) does not exempt the company from registration of the cryptocurrency in the United States.
Following the Commission’s request, SimplyVital decided not to move forward with a public ICO, not to issue or provide HLTH after the Commission closed the pre-sale. SimplyVital then announced that it plans to postpone the development of Health Nexus and returned the funds to investors who participated in the pre-sale preparation.
The first order of the Commission offers two options for market participants:
Private placements of securities must comply with the requirements of the relevant exception. In this case, the U.S. Securities and Exchange Commission accused SimplyVital of not being able to verify that only accredited investors participated in the pre-sale through the ICO pools. These ICO pools were a form of Special Vehicle (SPV), which was either required to accredit investors independently or for each investor in an accredited SPV investor, and SimplyVital was unable to verify these facts.
The U.S. Securities and Exchange Commission may be lenient with violators of the Securities Act who voluntarily seek to correct investors’ losses. Although SimplyVital’s return to investors of almost all the proceeds from the pre-sale activities led to exemption from liability imposed by the regulatory authorities and the commission referred to this return in its decision not to impose civil or criminal penalties. The Commission’s order to obtain registration for the U.S.A. cryptocurrency is also in stark contrast to the criminal and civil objections raised against issuers who allegedly fled from ICO’s nightly fraud proceeds.
The second order of the US Securities and Exchange Commission
In its second Rating Order, the U.S. Securities and Exchange Commission announced a settlement (including a civil fine) of the Russian corporation ICO Rating for violating Section 17(b) of the Securities Act.
The second order states that from December 2017 to July 2018, ICO Rating announced that it conducted an independent analysis, research and rating of tokens offered by ICO, but that in fact the company received monetary compensation from many issuers during the assessment process. The Securities Act requires those who publish information about the securities to disclose any fees received from the issuer of the securities so that market participants can assess the accuracy of the information. ICO Rating was unable to disclose this information and convince potential investors that they were receiving impartial research rather than paid advertising content.
The U.S.A Securities and Exchange Commission (SEC) has issued a clear and binding message to the market: those who research, evaluate, and promote securities – and those who sell or broker securities – must comply with securities laws “regardless of whether the advertised securities are issued using traditional certificates or on blockchain.
Please note that the information in the article is for information purposes only and cannot be used as a basis for any active action. If you have any questions, you can ask our experts. IQ Decision UK Ltd is the company that accompanies us at every stage of registering a cryptographic company in the U.S., obtaining a license for cryptographic activities in the U.S. and other jurisdictions.