Thanks for subscribing! Please check your email for further instructions.
Share this post
On October 31, 2017, Munchee Inc. (Munchee) launched an Initial Coin Offering (ICO) to raise $15 million to improve its blockchain-based iPhone app, an app to post pictures of and review restaurant meals. The next day, the U.S. Securities and Exchange Commission (SEC) contacted Munchee – not because they were interested in the token sale – but to shut down the ICO. Within hours, Munchee wisely stopped selling its digital tokens (MUN tokens) and returned all $60,000 offering proceeds to investors. On December 11, 2017, the SEC instituted cease-and-desist proceedings against Munchee (Order).
What were the SEC’s reasons for shutting down the ICO?
The following breaks down why, according to the SEC, MUN tokens satisfied the four elements of an “investment contract” under SEC v. W.J. Howey Co. (Howey Analysis):
The MUN White Paper referenced the DAO Report and stated that a Howey Analysis was performed, but, according to the SEC’s analysis, incorrectly concluded that MUN tokens were utility tokens. The Order explains that even if MUN tokens had a practical use at the time of the offering, it would not preclude the tokens from being securities. As stated in the Order, determining whether a transaction involves a utility or security does not turn on labelling but instead requires an assessment of “the economic realities underlying a transaction.”
What are some Best Practices to help you launch an SEC compliant ICO?
Perform legal analysis to determine whether your token is a utility token or a security token!
In the pre-sale phase, it is critical to have counsel correctly perform legal analysis to determine whether your token is a utility token or a security token. The Order points out that the Howey Analysis is missing from the MUN White Paper, implying that it may be best practice for issuers to disclose legal analysis in their white papers.
File a registration statement or Qualify for an exemption from registration!
Offers and sales of securities must be registered, exempt from registration, or they are in violation of the federal securities laws. Munchee offered MUN tokens to the general public without filing a registration statement or qualifying for an exemption and the tokens were deemed to be securities by the SEC. Some exemptions that provide an alternative to filing a registration statement include Regulation CF, Regulation A or Regulation D.
Do not guarantee that tokens will be traded on secondary markets!
The MUN White Paper ensured that MUN tokens would be available on a number of exchanges in varying jurisdictions and the tokens would be available for trading on at least one U.S. based exchange within 30 days of the conclusion of the offering. This was another factor that led the SEC to conclude that MUN tokens were securities because investors expected MUN tokens to trade on a secondary market and increase in value.
Do not promise A SPECIFIC return on investment!
Munchee promised “199% GAINS on MUN token at ICO price!” This was another factor that led the SEC to conclude that MUN tokens were securities because investors expected MUN tokens to increase in value.
Hi, Neat post. There’s an issue together with your web site in web explorer,
could check this? IE nonetheless is the market chief and a large portion of people will pass over your magnificent writing because of this problem.
Thanks for stopping by!
Howdy! I could have sworn I’ve visited this site before but after going
through many of the posts I realized it’s new to me.
Anyways, I’m certainly pleased I found it and I’ll be book-marking it and checking back regularly!
adreamoftrains best web hosting sites
[url=http://vardenafilxr.com/]buy vardenafil[/url] [url=http://stromectol1.com/]ivermectin goodrx[/url] [url=http://lisinopril125.com/]lisinopril 7.5 mg[/url]
[url=http://dipyridamol.com/]dipyridamole brand[/url] [url=http://tetracyclinecaps.com/]tetracycline capsules 500mg[/url] [url=http://accutanisotretinoin.com/]accutane buy online[/url] [url=http://propecia8.com/]propecia mexico pharmacy[/url] [url=http://avodart24.com/]avodart online prescription[/url] [url=http://hydrochlorothiazide2.com/]hydrochlorothiazide capsules 12.5 mg[/url] [url=http://lexaporo.com/]purchase lexapro generic[/url] [url=http://tadalafillil.com/]otc tadalafil[/url]
Greate pieces. Keep writing such kind of information on your page. Im really impressed by your blog.
Hey there, You have done an excellent job. I will definitely digg it and personally recommend to my friends. I’m confident they’ll be benefited from this site.
This site uses Akismet to reduce spam. Learn how your comment data is processed.