The First SEC Strikes Against Unregistered Crypto Firms Are Here 4 1997

And so it begins.

For the first time ever, the Securities and Exchange Commission has issued a violation to a hedge fund manager for its investments in digital assets. They found Crypto Asset Management, or CAM, a California based crypto portfolio manager, operating as an unregistered investment company while claiming to be SEC regulated. Further, the SEC says CAM was falsely marketing itself as the “first regulated crypto asset fund in the United States.”

Over a four month public offering last year, CAM’s Managing Director Timothy Enneking raised upwards of $3.6 million based on this claim, and invested 40 percent of the fund’s assets into cryptocurrencies, thus operating the fund as an unregistered investment company. CAM received a cease and desist order, with which they complied, and the SEC fined them $200,000. CAM agreed to pay the fine without admitting to or denying the SEC’s findings, and offered buy backs to investors.

The Fall of TokenLot, the SEC’s Second Target

Tuesday the SEC also charged Michigan LLC TokenLot, which closed down at the end of July, with operating as unregistered broker-dealers. TokenLot called themselves an “ICO Superstore,” which co-founders Lenny Kugel and Eli L. Lewitt promoted as a space to buy into ICOs and trade tokens on a secondary market. Through their platform, over 6 thousand retail investors traded more than 200 different tokens which, by the SEC’s standards, qualified as securities and therefore fell under SEC regulations.

It’s the first time the SEC has enforced last year’s DAO Report, which warned traders that digital assets like DAO tokens would be considered securities, and subject to regulations as such. After the SEC’s charges, TokenLot started refunding payments to investors for unfilled orders and began the process of closing down, also without admitting to or denying charges.

Lightened penalties include $471,000 for the company, plus interest, and $45,000 each in personal fines to Kugel and Lewitt.

“The penalties in this case reflect the prompt cooperation and remedial actions by TokenLot, Kugel, and Lewitt,” says SEC Co-Director of Enforcement Division Steven Peikin.  “TokenLot, Kugel, and Lewitt provided valuable information to Commission staff, stopped the conduct, and refunded money to investors.”

Making Examples, or Starting a Crackdown?

The SEC could be making examples of TokenLot and CAM, but there could be more of a crackdown coming.

The charges emerge after the SEC subpoenaed 80 cryptocurrency firms earlier this year, including the $100 million cryptofund of Michael Arrington, founder of TechCrunch. While not indicators of misdoings, the subpoenas were tells that the SEC was working out its terms for coming indictments.

Securities Investigations Extend Beyond US Borders

Also earlier this year, the North American Securities Administrators Association (NASAA), an international investor protection agency, initiated ‘Operation Cryptosweep’ to target fraudulent ICOs and crypto investment products across the US and Canada.

“While not every ICO or cryptocurrency-related investment is a fraud, it is important for individuals and firms selling these products to be mindful that they are not doing so in a vacuum,” says Joseph P. Borg, President of NASAA and Director of Alabama Securities Commission. “State and provincial laws or regulations may apply, especially securities laws. Sponsors of these products should seek the advice of knowledgeable legal counsel to ensure they do not run afoul of the law. Furthermore, a strong culture of compliance should be in place before, not after, these products are marketed to investors.”

The NASAA operation has already resulted in over 200 investigations and 45 enforcements, as of last month, to the applause of the SEC.

The SEC’s own first strikes arrive amidst a crypto slump, as several leading coins, including Bitcoin, Ethereum, and Ripple, are exploring new lows.

“U.S. securities laws protect investors by subjecting broker-dealers and other gatekeepers to SEC oversight, including those offering ICOs and secondary trading in digital tokens,” Stephanie Avakian, Co-Director of the SEC’s Enforcement Division says. She encourages developers of businesses in digital asset trading to contact the SEC “for assistance in analyzing registration and other securities law requirements.”

Any of the many crypto firms still operating unregistered would be wise, at this point, to square up.

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I grew up in the Silicon valley under the technological mentorship of Steve Wozniak. I'm a proud member of the Choctaw Nation, I've lived, worked and traveled all over the world, and I now write in the Pacific Northwest.

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How a Thief Stole More Than $1M in NFTs on Instagram Comments Off on How a Thief Stole More Than $1M in NFTs on Instagram 405

A common use case for the blockchain is reducing fraud. Shouldn’t that mean it’s impervious to hackers? Not necessarily. Here’s how a hacker was able to amass more than $1 million in stolen Bored Ape Yacht Club NFTs.

For any of us that have received a nefarious link in our emails or on social media that encourages us to input private information, we’re already familiar with the logistics of phishing. A hacker sends us a link, usually under the guise of a brand or person we recognize, and asks for personal details like usernames, passwords, or bank details that aid them in assuming our identity or assets. 

It’s precisely what happened in the case of the Bored Ape Yacht Club hack which was announced on Twitter Monday morning. 

A hacker was able to take charge of the official Bored Ape Yacht Club Instagram profile, and sent a communication to followers claiming to be offering an “airdrop,” which is a term used to describe a free token giveaway. (Note: it’s not clear at this time how the hacker was able to login to the official Instagram, in the first place.)

Users were asked to link their wallet to benefit from the airdrop, which made their mobile wallet susceptible to the hacker and resulted in the transfer of multiple NFTs, presumably including four Bored Apes and a number of other NFTs minted by the Bored Apes creators, Yuga Labs.

The hack illuminates a glaring problem in the NFT market. Namely, MetaMask, the popular wallet application, only supports NFT display on mobile which is less user-friendly than the platform’s browser extension leading to mistaken transaction approvals.

What’s the solution for NFT holders? “MetaMask with Ledger,” according to Adryenn Ashley. “NFT holders need a wallet that gives them the ease of MetaMask with the security of hardware.”

The hack is a reminder that even though the blockchain has the potential to overcome fraud, users still need to be mindful of third party applications that manage their data. 

Serial Entrepreneur Lisa Carmen Wang Launches the Bad Bitch Empire Comments Off on Serial Entrepreneur Lisa Carmen Wang Launches the Bad Bitch Empire 565

While cryptocurrency has a notorious reputation for investment volatility, its adoption has marked one of the most significant shifts in wealth of our generation.  Last year, CBS reported that as many as 100,000 people may have amassed millions in bitcoin with many profiting from early adoption of the high profile cryptocurrency. When you zoom into where the wealth is distributed, though, the data is alarming. 

Recently, Entrepreneur published a list of The 50 Richest People in Crypto. On the list are individuals that made fortunes as shrewd investors and early technology adopters, but there’s one person that stands out. From this list of men from various parts of the world, Blythe Masters is the only woman listed reflecting a broader problem: women are consistently underrepresented in new technology sectors and the blockchain is no exception.

A survey by Pew Research found that more than 40% of men have invested or traded cryptocurrency, compared with only 19% of women. Moreover, half of women in STEM occupations have experienced workplace discrimination, further marginalizing the group from participation in emerging technologies. Fortunately, there are women actively changing the status quo.

As the founder of SheWorx, which was acquired by Republic in 2019, Lisa Carmen Wang made a career amassing resources for female founders and working to change the number of women represented in tech leadership. Now, she’s set her sights on leveling the playing field for women through financial literacy. 

“It wasn’t until I began investing myself that I really began to understand how to grow wealth,” says Wang. “Financial and investment literacy is essential to giving women a seat at the table, particularly when a sector is emerging and rapidly growing. Crypto is having one of those moments, and women need to capitalize on the opportunity in order to create systemic and meaningful change.”

Wang’s Bad Bitch Empire will be a community with a suite of educational and investment products beginning with a podcast about women breaking barriers and building wealth in Web3. According to the website, the “Bad Bitch Empire is the private crypto investment club for ambitious women who want to make our money work for us.”

High profile members include Lindsey Berg, Shannon Snow, Elizabeth Tan, Chi Achebe, Yael Streit, Katia Zaitsev, and Shaun Sager, to name a few. 

The BAD BITCH EMPIRE was unveiled at this year’s  Bitcoin 2022, the largest conference focused on Bitcoin alongside the podcast’s inaugural episodes. For more information or to request to join visit www.thebadbitchempire.com.

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