ASIC keeping eye on initial coin offerings

The Australian Securities and Investments Commission (ASIC) is making good on its promise to keep an eye on initial coin offerings (ICOs), announcing it has stopped several ICOs and token-generating events targeting retail investors.

ASIC stated it has handled five separate matters since April, preventing ICOs raising capital without appropriate investor protections. According to ASIC, these ICOs have been put on hold, and some will be restructured to comply with the applicable legal requirements.

The watchdog also recently stopped the issue of a product disclosure statement for a crypto-asset managed investment scheme.

In a statement, ASIC stated it has identified consistent problems, including: the use of misleading or deceptive statements in sales and marketing materials; operating an illegal unregistered managed investment scheme; and not holding an Australian financial services licence.

John Price, ASIC commissioner, said that those seeking to raise money from the public have important legal obligations.

“It is the legal substance of your offer – not what it is called – that matters. You should not simply assume that using an ICO structure allows you to ignore key protections there for the investing public and you should always ensure disclosure about your offer is complete and accurate,” he said.

ASIC had in May announced it would be keeping a close eye on ICOs after it was granted delegated powers from the Australian Competition and Consumer Commission (ACCC) in April to take action under the Australian Consumer Law relating to crypto assets.

These delegated powers allow ASIC to take action against misleading or deceptive conduct it identifies in the marketing or selling of ICOs.

The organisation stated in May that it is issuing inquiries to issuers of ICOs and their advisers where it identifies conduct or statements that may be misleading or deceptive; it is also issuing inquiries where it identifies potentially unlicensed conduct.

With ICOs effectively a crowdfunding process through which companies offer virtual tokens or coins in exchange for funds, ASIC believes they can “involve significant risks for investors that are often not disclosed or well understood”.

“ICOs are highly speculative investments that are mostly unregulated, and while there are genuine businesses using this structure many have turned out to be scams,” ASIC stated.

Image: John Price.