According to Bloomberg, the Menlo Park, California-based hedge fund Pantera Capital Management disclosed that about 25 percent of the crypto projects that its ICO fund invested in could be found in violation of U.S. securities laws. Hence, the fund may have to refund money to their investors.
These projects may be at risk after the U.S. Securities and Exchange Commission’s Nov. 16 announcement that two startups that raised millions by issuing tokens to non-accredited investors didn’t comply with U.S. securities laws. One of the projects, Paragon Coin, has already announced it may have to pay back investors (read our article here).
“While we believe the vast majority of the projects in our portfolio should not be affected, approximately 25 percent of our fund’s capital is invested in projects with liquid tokens that sold to U.S. investors without using regulation D or regulation S,” Dan Morehead and Joey Krug, Pantera’s co-chief investment officers, disclosed in the newsletter Thursday. “If any of these projects are deemed to be securities, the SEC’s position could adversely affect them,” he continued.
Many ICOs didn’t register with the SEC but sold their tokens to non-accredited retail investors. The SEC had made it pretty clear already over the last couple of months that it regards most tokens as security tokens and thus securities. Issuers of such security tokens have to comply with the securities laws.
Pantera Capital‘s announcement provides a guidance of what we may have to expect in the post-ICO era 2019 and beyound. Not only will many ICO projects fail but even successful projects may run into troubles if their tokens are deemed to be securities.
Currently, the future of crypto doesn’t look too bright, does it?
Analyst Ryan Selkis put it right in a tweet today: “I am most bullish on lightning and lawyers in 2019”
I'm most bullish on lightning and lawyers in 2019.
The latter is probably obvious, but anyone have good pros and cons for lightning? Opportunities and challenges to be addressed? Resources?
— Ryan Selkis (@twobitidiot) December 18, 2018