According to a press release issued Wednesday, the Securities and Exchange Commission (SEC) initiated proceedings against American CryptoFed DAO LLC after it filed an allegedly incomplete and inaccurate form seeking to register its “Ducat” and “Locke” digital tokens. The SEC’s order pauses the Wyoming-based organization’s planned registration of the two tokens as securities pending a determination as to whether the SEC must deny or suspend the effective date of the tokens to protect investors.
The SEC explains that in September, American CryptoFed filed an allegedly deficient and misleading Form 10, an official filing requisite to registering tokens as securities. Specifically, the company’s form “failed to contain certain required information about the two tokens as well as about American CryptoFed’s business, management, and financial condition, including audited financial statements.”
In addition, the SEC contends that the form contains misleading statements and omissions, including contradictory statements about whether the tokens are securities. The agency also takes issue with statements relating to American CryptoFed’s planned intention to distribute its Locke tokens to the public with a registration used for securities offered to employees through employee benefit plans, without adequately disclosing that Locke tokens may not legally be distributed through that conduit.
“Issuers attempting to raise money from the public must provide the information necessary for investors to make informed decisions,” Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit said in a statement. “We allege American CryptoFed made materially misleading statements and failed to provide legally required information in its registration form.”
The tokens’ registration is stayed pending a decision by an administrative law judge regarding suspension or denial. The respondent has ten days to file an answer to the SEC’s probe.
