The head of the U.S. Securities and Exchange Commission (SEC) expressed concern today that initial coin offerings (ICO) may be exposing buyers to possible fraud.
Speaking during an event in Washington, D.C. today, SEC chair Jay Clayton indicated he expects the practice, by which entrepreneurs sell cryptographic tokens that will power future blockchains to fund development, will be susceptible to abuse from “pump-and-dump schemes,” according to a report from Bloomberg.
“This is an area where I’m concerned about what’s going to happen to retail investors,” he was quoted as saying.
And recent actions by the agency support Clayton’s stated fears. On Tuesday, the SEC unveiled a new cyber unit dedicated in part to policing “violations involving distributed ledger technology and initial coin offerings.”
It was earlier this summer that the SEC formally outlined its intention to police activities around ICOs, declaring that it would consider tokens issued in such sales as securities offerings in some instances.
As part of that release, the SEC revealed the findings of an investigation into The DAO, the ethereum-based funding vehicle that collapsed in the summer of 2016 following a fatal code exploit.
“U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular offer or sale,” the agency said at the time.
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