SEC Enforcement Director: ICO Fraud Requires 'Thoughtful Approach'

SEC Division of Enforcement co-director Stephanie Avakian said the agency's new cyber unit would look at how blockchain technology and ICOs are used.

Oct 27, 2017 at 7:30 p.m. UTC
Updated Sep 13, 2021 at 7:05 a.m. UTC

The SEC's new cyber unit appears to be stepping up its rhetoric on ICOs.

Speaking at the Securities Enforcement Forum on Thursday, SEC Division of Enforcement co-director Stephanie Avakian took the opportunity to give a broad overview of the unit's mission, once again emphasizing that token sales, the process by which startups use custom cryptocurrencies for fundraising, would be a focus.

The cyber unit, first announced late last month, has said it will target "misconduct perpetrated using the dark web," particularly where cryptocurrencies like bitcoin are used.

As such, Avakian said that the cyber unit was created to consolidate the regulatory body's expertise on cybercrime, and include a focus on blockchain technology, particularly initial coin offerings.

While blockchain technology can be used to raise funds legitimately, it can also be abused, she said, noting that "like many legitimate ways of raising capital, the popular appeal of virtual currency and blockchain technology can be an attractive vehicle for fraudulent conduct."

Referring to a previous SEC report which said digital tokens would be considered the way securities are under U.S. law, she ultimately said blockchain needs a "consistent, thoughtful approach."

She said:

"We think that creating a permanent structure for the consideration of these [ICOs] within the Cyber Unit will ensure continued focus on protecting both investors and market integrity in this space."

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