Many companies have shied away from the ICO designation, opting instead for “utility ICO” or “token generation event” as to distance themselves from the regulated world of securities. Clayton said games with semantics won’t fly with the SEC.
“Many of these assertions appear to elevate form over substance,” he said. “Merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security.”
The international nature of cryptocurrencies can also pose a threat to investors, Clayton said:
“Please also recognize that these markets span national borders and that significant trading may occur on systems and platforms outside the United States. Your invested funds may quickly travel overseas without your knowledge. As a result, risks can be amplified, including the risk that market regulators, such as the SEC, may not be able to effectively pursue bad actors or recover funds.”
Earlier this year Monarch had found himself in default due to his lawyers legal errors. Last month the judge presiding over the case against Monarch in South Carolina set the case on trial, stating that it should be tried on the “merits.”
