WuBlockchain reported that last month, the U.S. Securities and Exchange Commission (SEC) sued Ethereum software provider Consensys, accusing its MetaMask wallet of acting as an unregistered broker and facilitating the sale of a large number of unregistered securities. The SEC also once again detailed some of the cryptocurrencies that meet the definition of securities.
(The U.S. SEC sued Consensys, targeting MetaMask and Ethereum staking services: Lido and Rocket Pool were all involved)
SEC v. Consensys: MetaMask Swap Traded Large Numbers of Unregistered Securities
Last month, MetaMask, which provides a "Swap" service for users to directly trade digital assets, was accused by the SEC of assisting in the transactions of unregistered securities and profiting from it:
Consensys has facilitated more than 36 million crypto transactions through MetaMask in the past four years, of which "at least 5 million" involved crypto-asset securities.
The mentioned cryptocurrencies include AMP, AXS, CHZ, COTI, FLOW, MANA, MATIC, NEXO, SAND and LUNA, etc., and just this month a US judge ruled that its initial coin offering (ICO) did involve BNB issued as unregistered securities.
(Binance kicks the iron? The judge approves most of the SEC’s charges. Only BUSD and coin-earning services are not investment contracts)
Five of these cryptocurrencies are compiled below and detailed explanations are provided.
MATIC
As the native token of the Ethereum scaling platform Polygon, the SEC charged:
MATIC has token incentives: The white paper states that token holders can obtain additional income through staking; the founder has also stated that the MATIC token serves as an "economic incentive" for the Polygon network, giving users more incentive to participate in the Polygon ecosystem. .
Investors can reasonably expect profits: the tokens have a destruction mechanism; and Polygon has publicly stated the purpose of raising funds, which will be used to strengthen the Polygon ecosystem and make Ethereum lead other public chains.
The team is trying to guide investors to buy MATIC: the Polygon blog frequently updates financial indicators such as its network growth and development status; it promotes information about tokens being listed on exchanges; team members have also repeatedly promoted the amazing growth of the Polygon network.
Involving pre-mining: The official reserves a large number of tokens, about 67% of MATIC is used to support the ecosystem, and 20% is owned by the team and consultants.
Polygon founder Sandeep Nailwal talks currency prices
As early as last year, Polygon Labs had already responded to the above accusations.
(Polygon(MATIC), Solana(SOL), Cardano(ADA) three ways to respond to securities accusations)
WHERE
As the native token of the Ethereum virtual reality platform Decentraland, the SEC charged:
The protocol has incentives: Decentraland holds art, game and application creation competitions to provide token-based incentives for new and old users, claiming to promote the development of the network.
Investors can reasonably expect profits: the token has an adjustable supply and demand mechanism; Decentraland has also publicly stated the purpose of fundraising, which will be used for platform marketing and business expenses, emphasizing that the development budget will focus on improving the user's browsing experience.
The team tries to guide investors to buy MANA: Decentraland often emphasizes its development plans through white papers and public statements and guides investors to consider MANA as an investment tool.
Involving pre-mining: The official reserves a large number of tokens, 20% will be given to the development team, consultants and early contributors, while 20% will be given to the foundation.
CHZ
As the native token of the sports entertainment ecosystem Chiliz, the SEC alleges:
Investors can reasonably expect profits: the token has a regular transaction fee income destruction mechanism; Chiliz has also publicly stated the purpose of fundraising, which will be used to fund the development, marketing, business operations and growth of the Chiliz protocol; Chiliz strongly emphasizes the experience of the leadership team.
The team and investors have a destiny (interest) alignment: the team warned in the white paper that "price fluctuations in BTC, ETH, or ChZ may prevent the company from continuing to develop to the necessary extent or maintain the Socios platform in the expected manner."
The team is trying to guide investors to buy CHZ: The team has publicly stated that as Chiliz reaches cooperation with more teams, the value of the related “Fan Token” will increase, and the value of CHZ will also increase.
Involving pre-mining: The official reserves part of the tokens, about 5% is allocated to the development team, and 3% is given to the advisory board.
SAND
As the native token of the virtual gaming experience The Sandbox, the SEC alleges:
Investors can reasonably expect profits: tokens have a controllable supply and demand mechanism; The Sandbox has publicly stated the purpose of fundraising, which will be used for development, promotion of the platform and legal compliance; The Sandbox has also praised the rich experience of the leadership team, emphasizing Ability to complete future vision together with strong product roadmap.
The team is trying to guide investors to buy SAND: The Sandbox has promoted the listing of tokens on exchanges; investors and team members have publicly criticized The Sandbox's success and future development many times.
Involving pre-mining: The official reserves a large number of tokens, 19% will be given to the founders and development team, and 25.8% will be allocated to the company’s reserves.
OFFICER
As the native token of the stablecoin payment platform Terra, the SEC charged:
Investors can reasonably expect profits: Founder Do Kwon has publicly stated the purpose of raising funds, which will be used to fund operations and help establish and expand the Terra ecosystem; the website also promotes the expertise of its development team, claiming that Terraform is led by "serial entrepreneurs" .
The team is trying to guide investors to buy LUNA: Team members have talked about its token many times on social media and public interviews, claiming that LUNA is an "equity" in the company, and emphasizing that LUNA has a promising future as the ecosystem grows. of.
Involving pre-mining: It is said that both Terraform Labs and Do Kwon have reserved hundreds of millions of LUNA tokens for themselves.
Summary of the SEC’s basis for securities determinations
There is little difference from the previous description. Most of the SEC still summarizes and makes judgments based on the following principles:
Whether investors have reasonable expected profits from the token: whether the team designs a deflation or supply mechanism, whether it has publicly stated its development plans and a strong team background
Whether the token is an incentive for investors to participate in the ecosystem: whether the protocol has incentives or reward mechanisms, and whether the team has publicly stated the purpose or use of the fund-raising.
Whether the team has a reserved share of tokens: whether the founder, development team or foundation involves pre-mining or reserved shares in the token distribution
(Detailed explanation of the SEC's standards for determining securities. It is a crime for the currency issuance team to discuss technology, occupy the token supply, and design a deflation mechanism)
Generally speaking, the first characteristic alone may lead to prosecution under the Howey Test's definition of a security, and any other team's description of the token will enhance the likelihood of prosecution.
However, this seems to be inconsistent with the views of the Chairman of the U.S. Futures Trading Commission (CFTC), who claimed that up to 70 to 80% of cryptocurrencies, including BTC and ETH, are not securities.
This article breaks down the SEC v. Consensys case: What “crypto securities” transactions did MetaMask facilitate? What are the standards? First appeared in Chain News ABMedia.
