A federal court decision granting the US Securities and Exchange Commission a preliminary injunction against a first coin officer gives some guidance to ICO companies on how to proceed without being subject to regulatory control.
This, in turn, could lead to the insurance companies' greater willingness to offer coverage for cryptographic curves, observers say.
In his February 14 judgment, US judge Gonzalo P. Curiel of San Diego confirmed a previous judgment and granted the SEC a preliminary ban on Los Angeles-based Blockvest LLC in Securities and Exchange Commission against Blockvest LLC and Reginald Buddy Ringgold III a / k Rasool Abdul Rahim El.
The complaint alleged that the defendants offered and sold unregistered securities in the form of digital assets called BLVs that involved a first coin supply, they said.
The SEC complaint said Blockvest and Mr. Ringgold incorrectly explained their ICO had been registered and approved by the SEC and used the agency's sails on the company's website.
As judge of the SEC's favor, the judge said that the agency "has presented a prima facie showing" of federal securities law fraud "which creates a conclusion that the defendant is likely to violate the securities law in the future, if not is allowed. "
A secretary from the SEC had no comment beyond the release issued on the court, while a blockvest spokesman could not be reached.
"You really can't exaggerate the significance of any court judgment" on cryptocurrency because there is so much hype surrounding it, with every judgment "looking under a microscope", says John Reed Stark, Bethesda, Maryland-based John Reed Stark Consulting LLC, who is a former head of the SEC's Internet Administration Office.
Cryptocurrency is "promoted as a means of financing that is quick and easy, and boards must be concerned when doing so whether their insurance company would cover any liability issues related to that space," said Mr. Stark, who believes that ICO should be regarded as securities.
However, insurers have generally not been willing to assure cryptocurrency related issues. David Zaslowsky, a partner with Baker & McKenzie LLP in New York, said: "I think much of the SEC is the amount of fraud that has happened to these companies and so much money has disappeared. I think insurance companies would be reluctant to sign these companies because there are very few of those who have track records. "
American International Group Inc., like most insurance companies in financial lines, takes a cautious approach," says David Murray, New York-based financial lines product development manager for AIG. who spoke during a cryptocurrency session at the Professional Liability Underwriting Society 201
"Our appetite for this risk continues to be limited and basically a reflection of the uncertainty in the legislation," the biggest challenge, he said. Another factor is that this area is "at a very early stage" and lacks a pre-history. "
" You have a market that is more conservative with the capital they can distribute. There is no reason for an operator to feel that it must enter the ICO space, says Rob Yellen, New York-based vice president of Willis Towers Watson PLC's FINEX North America Exercise.
Blockvest Blockvest ] ruling is a positive development because it provides clarity and a consistent framework for ICOs to follow, says Mr. Yellen.
The verdict is "the type of roadmap for what companies should not do when marketing their ICOs," said William D. Carson, an associate of Clyde & Co USA LLP in Washington.
A major insurer's concern is the "ICO process right now is a bit like the wild west, and there is a lot of Silicon Valley in the way it is marketed," he said. "This is a good example of what not to do," he said, adding the company's statements "just plain out of true", referring to the SEC's claims.
Mr. Carson said, "It is difficult to effectively price the product because we do not really know what the risks are", so it is difficult for insurance companies to perform due diligence. "
" But once again, cases and more SEC actions are initiated and resolved, the opacity of this problem will clarify, and if the price is right, and people are willing to buy it at a price that is useless, then of course, the carriers will offer the coverage, says Mr. Carson. 19659002] Jacob Decker, Vice President of Seattle and Director of Financial Institutions of Woodruff Sawyer, said: "The carriers are still very cautious" when they provide coverage for ICO corporate exposure exposures because "they are looking for the best in class. as "from a cultural perspective" trying to do the right thing, he said. "
They are also looking for those who" want to proactively engage regulators, setting up governance and internal controls, "and following more traditional companies offering shares or shares to the public, he said.
There have been some R&D policies issued in conjunction with ICO, but "it is not wide. It is very risk-specific, so if we can place a client really to be first in the class," have the right management team and right approach "and do all the things that give the wearer's comfort, there are carriers who want the calls and willing to provide meaningful coverage," he said.
Sarah Downey, Marsh LLC's co-ordinator for his digital asset transfer law in New York, once said there is clear guidance from the SEC on what is and not A security, the positions of defense will change. With greater certainty, the insurance market will be so much more comfortable offering the coverage, "she said.
Ms. Downey said right now, while it's difficult, some customers have received insurance for digital assets. "Coverage is not impossible to get. It's just hard to get right now," she said.