SEC Stops Wyoming-Based DAO From Registering 2 Digital Tokens

The agency is alleging that American CryptoFed filed a “materially deficient and misleading registration form.”

AccessTimeIconNov 11, 2021 at 3:19 a.m. UTC
Updated May 11, 2023 at 4:42 p.m. UTC

The U.S. Securities and Exchange Commission (SEC) stopped a Wyoming-based decentralized autonomous organization (DAO) from registering two digital tokens as securities, the agency said on Wednesday.

In the announcement, the SEC’s Enforcement Division alleged that on Sept. 16, American CryptoFed “filed a materially deficient and misleading registration form known as a Form 10, which purported to register two digital tokens issued by the company – the ‘ducat’ and ‘locke’ tokens – as equity securities.”

The SEC alleged that this form lacked mandated information about the tokens and American CryptoFed’s business, including audited financial statements. It also alleged that the Form 10 misstated and omitted information, including whether the ducat and locke tokens are securities.

American CryptoFed CEO Marian Orr wrote in an email to CoinDesk that the company had sent a letter to the SEC on Oct. 12 that “rebutted point by point the deficiencies raised” by agency. Orr added: “If the SEC is unready to make a declaration that CryptoFed’s two tokens are not securities, to meet the spirit of Securities Laws’ transparency and disclosure, we shall argue SEC should allow our Form 10 filing to become effective in time so that we may continue disclosing material and substantial information to the SEC, related parties and the general public.”

In September, American CryptoFed filed an S-1 form to register the tokens with the SEC for use in a secondary market and in refundable auctions at a higher value than their original purchase price from CryptoFed. In the filing, the company described the ducat and locke “as utility tokens, not as securities.”

In July, Wyoming legally recognized American CryptoFed. That determination came after the state became the first in the U.S. to recognize DAOs as a type of limited liability company.

In its announcement Wednesday, the SEC also said that in an S-8 form, an SEC registration form that allows companies to offer employees securities through employment benefit plans, American CryptoFed had failed to disclose that completing the form wouldn’t legally allow the distribution of the tokens.

“Issuers attempting to raise money from the public must provide the information necessary for investors to make informed decisions,” said Kristina Littman, chief of the SEC Enforcement Division’s cyber unit. “We allege American CryptoFed made materially misleading statements and failed to provide legally required information in its registration form.”

An administrative law judge will decide whether to deny or suspend the tokens’ registration, the SEC said.

(UPDATE Nov. 12 20:27 UTC): Adds comments from American CryptoFed.


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James Rubin is CoinDesk's U.S. news editor based on the West Coast.

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