The Securities and Exchange Commission sent subpoenas in recent weeks to dozens of tech companies and individuals who are involved in cryptocurrency, The Wall Street Journal reported Wednesday evening, citing anonymous sources.
The targets of the subpoenas include companies that have launched initial coin offerings (ICOs), the cryptocurrency equivalent of IPOs, as well as their lawyers and advisers. The subpoenas reportedly include requests for information on how ICO sales and pre-sales are structured, the anonymous sources told WSJ. The SEC is also requesting the identities of the investors who bought digital tokens, The New York Times found. The SEC declined to comment.
Shares of furniture retailer-turned-cryptocurrency company Overstock took a nosedive following the SEC news. Although Overstock did not mention a subpoena, it stated in its SEC regulatory filing today that the SEC was conducting an investigation and “requested that the company voluntarily provide certain documents related to the Offering and the Tokens in connection with its investigation.”
Aaron Kaplan, a securities attorney and co-founder of Prometheum, a startup aimed at helping investors become SEC-compliant, said, “Generally, subpoenas are the guided missiles of SEC enforcement actions. There’s going to be a big reckoning for those who have operated outside the Federal Securities Laws, with more SEC enforcement actions and criminal prosecutions in the near future.”
Over the past few months, the SEC has hinted at a crackdown on ICOs, which is a relatively new field that has not seen a lot of regulation compared to initial public offerings. In comments to the Senate banking committee earlier this month, the SEC’s chairman Jay Clayton revealed that zero ICOs had registered with the commission as of February 6th, although such offerings have become wildly popular since last year.
“Many ICOs [initial coin offerings] are being conducted illegally,” Clayton said at the time. “Their promoters and other participants are not following our security laws. Some people say that’s because the law isn’t clear. I do not buy that for a moment.”