Disclaimer: The article has been updated based on an official response from the DAO of American CryptoFed. COO Xiaomeng Zhou explained why the SEC is not legally allowed to issue a stop order.
The DAO of American CryptoFed, the first decentralized autonomous organization (DAO) to gain legal recognition in United States, you are at risk of losing your registration after the United States Securities and Exchange Commission (SEC) unearthed anomalies in the Form S-1 registration statement dated September 17, 2021.
The Wyoming Secretary of State’s office recognized American CryptoFed as a legal entity in July 2021, at a time when the organization’s CEO, Marian Orr, believed that “Wyoming is arguably the best blockchain jurisdiction in the world.”
Nevertheless, On November 18, 2022, the SEC commenced administrative proceedings against the DAO to determine the issuance of a stop order.. An SEC stop order would retract American CryptoFed’s registration and ban sales of internal, Ducat, and Locke tokens.
According to the SEC’s Enforcement Division, the Form S-1 registration statement filed by American CryptoFed lacks vital information, such as audited financial statements and details about its business and management. The SEC further found American CryptoFed’s filing to contain “misleading statements and omissions,” while also being inconsistent in describing tokens as securities.
In this regard, David Hirsch, Head of the Crypto Assets and Cyber Unit of the Enforcement Division stated that:
“American CryptoFed not only failed to comply with the disclosure requirements of federal securities laws, but also asserted that the securities transactions they seek to record are not securities transactions at all.”
Hirsch clarified that issuers must provide the required information to the SEC. However, the SEC alleged non-cooperation from American CryptoFed during the examination of its registration statement.
Based on information made publicly available, Hirsch shared the SEC’s intent with respect to the DAO:
“The Enforcement Division is trying to stop the registration of American CryptoFed to protect investors against misleading information.”
Speaking to Cointelegraph, American CryptoFed COO and organizer Xiaomeng Zhou, argued against the SEC’s claims, asserting that the matter concerning the effectiveness of the registration statement (Section 8(d) Order) is unlawful, asserting that the American CryptoFed DAO Form S-1 ( “Form S-1”) includes an “Amendment of Delay”.
As a result, the American CryptoFed DAO’s Form S-1 is subject to Section (a) and Section 8(b) of the Securities Act of 1933, according to Zhou. He added:
Section 8(b) of the Securities Act of 1933 only allows the SEC to issue a Denial Order to provide clearer guidance for the American CryptoFed DAO to complete the Form S-1 registration (not the Stop Order).
Zhou reiterated that Section 8(b) of the Securities Act of 1933 allows the SEC to issue a Denial Order and provide clear guidance for completing Form S-1 registration. However, it does not allow the federal agency to issue a stay order:
“As a result, the SEC abused the Securities Act of 1933 to unlawfully delay, stop, and obstruct the legitimate disclosure of the American CryptoFed DAO through the Form S-1 Registration Statement.”
Cointelegraph discovered that the official Telegram channel for the DAO has been disabled.
However, the deletion of the Telegram account was not yet linked to the SEC investigation at the time of writing.
The Securities and Exchange Commission of the Bahamas (SCB) recently ordered the transfer of all FTX Digital Markets (FDM) digital assets to a commission-owned digital wallet.
Securities Commission of The Bahamas Assumes Control of Assets of FTX Digital Markets Ltd. pic.twitter.com/IzW4PGZSJm
— Securities Commission of The Bahamas (@SCBgov_bs) November 18, 2022
The assets were seized “for their custody”, according to an official statement shared by the SCB.
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