|The Securities and Exchange Commission has also put out an investor bulletin on the raising of investor funds through an ICO.
THE SEC specifically warns, “Investing in an ICO may limit your recovery in the event of fraud or theft. While you may have rights under the federal securities laws, your ability to recover may be significantly limited.”
The Securities Exchange Commission also put out a bulletin about their investigation of the DAO (Decentralized Autonomous Organization) https://www.sec.gov/litigation/investreport/34-81207.pdf Among the SEC’s findings,
“The investigation raised questions regarding the application of the U.S. federal securities laws to the offer and sale of DAO Tokens, including the threshold question whether DAO Tokens are securities. Based on the investigation, and under the facts presented, the Commission has determined that DAO Tokens are securities under the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”).1”
1 This Report does not analyze the question whether The DAO was an “investment company,” as defined under Section 3(a) of the Investment Company Act of 1940 (“Investment Company Act”), in part, because The DAO never commenced its business operations funding projects. Those who would use virtual organizations should consider their obligations under the Investment Company Act.
Further, the investigation stated:
“The Commission deems it appropriate and in the public interest to issue this report of investigation (“Report”) pursuant to Section 21(a) of the Exchange Act2 to advise those who would use a Decentralized Autonomous Organization (“DAO Entity”), or other distributed ledger or blockchain-enabled means for capital raising, to take appropriate steps to ensure compliance with the U.S. federal securities laws. All securities offered and sold in the United States must be registered with the Commission or must qualify for an exemption from the registration requirements. In addition, any entity or person engaging in the activities of an exchange must register as a national securities exchange or operate pursuant to an exemption from such registration.”
Are cryptocurrencies currency? According to the IRS, digital currencies and cryptocurrencies like Bitcoin, Ethereum and others are not currency and not legal tender. They are, however, property for purposes of taxable capital gains.
The IRS also put out Notice 2014-21 on the taxability of “virtual currency”. There is significant buying, selling and trading of digital currencies that may be taxable events. https://www.irs.gov/pub/irs-drop/n-14-21.pdf
A Joe Doe warrant has also been served on Coinbase seeking the identities of its customers for purposes of tax matters. See the Department of Justice’s posting regarding this matter:
Additionally, the People’s Bank of China has recently made ICOs unlawful, and there are further restrictions coming on the largest trading platforms for cryptocurrencies in China, which are to shut down at the end of the month, leaving investors with many legal and practical questions about how to handle their current accounts.
Hacking has already taken a significant portion of crypto assets, and much more are vulnerable.
This environment is ripe for litigation. Trading platform losses, investment losses, breach of contract disputes involving securities, and other financial disputes has already given rise to lawsuits and certainly will in the future.
Our law firm handles all types of cryptocurrency and digital currency disputes, and as civil litigation and arbitration attorneys, we are familiar with how this new and changing regulatory scheme may affect civil litigation in state court, federal court, as well as AAA, JAMS, and FINRA Arbitration. Our services include:
If you have an investment loss, contract or other business dispute related to Bitcoin, Ethereum, or other cryptocurrencies, trading platforms, technology, startup, or other matter, contact us today for a consultation.
Attorney Daniel Bakondi, Esq.
The Law Office of Daniel Bakondi
870 Market Street, Suite 1157
San Francisco CA 94102
IMPORTANT NOTICE: No attorney-client nor confidential relationship is created through this communication and this posting does not constitute legal advice. Your issue may be time sensitive and may result in loss of rights if you do not act in time. Attorney licensed in California and services provided as allowed by law. Thank you.
This page was updated September 16, 2017 Copyright (c) Daniel A. Bakondi, Esq.
“Daniel Bakondi recently helped my business. He went above and beyond to research every detail of the case, help me examine all my options, and determine the best course. He is a true thinking attorney. Thank you so much Daniel for being so detail oriented and going above and beyond to take care of your clients!” CG
“Daniel Bakondi is an excellent attorney and I can highly recommend his services. Daniel’s persistence, creativity and knowledge of the law helped me recoup losses of a questionable business investment.”
“Daniel was very responsive and focused in helping me to address my Crypto Currency issue with Coinbase. If you need to reach Coinbase, he is a viable option. Can also be helpful for an array of other business, litigation and real estate law.”TW
“Mr. Bakondi is a poised and brilliant young man who asked extensive questions to get at the crux of the situation. I was continuously amazed at the fine/pertinent points that Mr. Bakondi dug out of the years of files I had provided him. He quickly filed legal action I would call impressive in its fact-finding, background research, and arguments. In subsequent attorney communications and motions, I saw this astounding incisiveness over and over again. More than once I remarked to him how glad I was that he was not the other side’s attorney! In forecasting the time, phases, and expenses of the case, Mr. Bakondi was also unerring. While the entire process took over a year, I never once had the feeling that he was not in complete control of the situation. In consultations, he always had all of the options and their consequences ready at hand, along with his recommendations. Not once did he make an inaccurate forecast or give bad advice. When the case concluded successfully, he tied up all the loose ends as meticulously as everything else he had done.”