SEC Investigates Crypto DAO for Filing Incomplete Registration Statement on Token Offerings
Commentary by Steven Lofchie
The SEC initiated administrative proceedings against a cryptocurrency decentralized autonomous organization ("DAO") and indicated that it may delay or suspend the registration on an offering of two crypto tokens.
According to the Order, the SEC alleged that the DAO's registration statement did not include relevant financial statements and failed to address specific disclosure requirements as required by Form S-1, Regulation S-X and Regulation S-K. Additionally, in the registration statement, the DAO asserted the offering is of
"utility tokens" that are not securities, which the SEC stated contradicted other language in the registration statement identifying the tokens as securities, as well as the registration for the offer and sale of the tokens under the Securities Act. In addition, the SEC alleged that the registration statement failed to provide a variety of required information such as a balance sheet and a list of material contracts.
The SEC alleged that the DAO has not cooperated with its inquiry and investigation into the registration statement omissions.
The offering and sale of the two tokens is temporarily prohibited pending a decision in these proceedings.
Commentary
This case is interesting. It explicitly raises the question of the extent to which the information required by the SEC in a registration statement is relevant to an offering of digital assets. In short, is the problem related to a purported refusal to answer or is the problem that the registration statement does not pose the right questions?