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GRAMS
Oct 15, 2019 21:35:47 GMT 4
Post by Sapphire Capital on Oct 15, 2019 21:35:47 GMT 4
The SEC filed an emergency action against the owners and operators (the "Defendants") of a mobile messaging application, requiring them to discontinue their allegedly illegal offering of digital assets (the "Grams"). The defendants asserted that Grams are intended to be a new virtual currency and, thus, are not a "security."
In a proceeding before the U.S. District Court for the Southern District of New York, the SEC argued that it was filing the emergency action against the Defendants in order to prevent them from "flood[ing]" the United States capital markets with "billions" of Grams. According to the SEC, Grams are securities because the initial purchasers expect to profit from the Grams' eventual resale (as opposed to using them as currency). Further, the SEC argued, although the Grams are being sold to accredited investors in generally private transactions, the Defendants have not taken any steps to prevent further redistribution in the United States. As a result, the Grams would not benefit from the private placement exemption from Securities Act registration, assuming that the Grams are, in fact, "securities."
The SEC is seeking as a final judgment (i) permanent enjoinment from engaging in related acts alleged in the Complaint, (ii) disgorgement of ill-gotten gains, (iii) prohibition of further violations of certain SEC rules, and (iv) a civil money penalty pursuant to the Securities Act.
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