According to Concannon, the reckoning will come in two waves. First, the U.S. Securities and Exchange Commission (SEC) will classify ICOs as unregistered securities and the holdings of investors would be “rendered valueless.” This would subsequently cause the second wave, as a slew of class-action lawsuits are filed against the companies behind ICO projects:
“The reckoning will come in two waves. First, the SEC will go after ICO market participants. Then, class-action lawsuits against the teams behind ICO projects will surge.”
Concannon said that ICO investors “should lay awake at night” worrying about the uncertainty in the ICO market. Concannon explained that if someone offered an unregistered coin, they would technically have issued an unregistered security, and in the eyes of the law would be considered an “unregistered underwriter.”
“If you sold someone an unregistered security you are liable to them if they decide to take them to court.”
Whether the SEC would retroactively prosecute ICO projects remains uncertain. Professor of financial regulation at Cornell University Robert Hockett said the SEC would likely only take action in extenuating circumstances:
“I don’t think it is the case that people involved in the business are going to be prosecuted against as if they have been violating the law. But there is a little bit of a room for exception with something particularly egregious.”
Financial regulators have repeatedly urged the public to comply with existing laws, and have taken action against those who have failed to do so. In a large-scale probe into suspicious crypto investment products dubbed “Operation Cryptosweep,” U.S. and Canadian regulators from 40 jurisdictions have opened up to 70 investigations.
Earlier today, founder of McAfee Antivirus Software and crypto enthusiast John McAfee announced that he will stop cooperating with ICOs and promoting ICO projects due to supposed threats from the SEC. McAfee, who revealed his second run for president in early June, claimed that he charges $105,000 per tweet to promote cryptocurrency projects and products.