As a part of the agency’s months-long probe into the nascent crypto fundraising mechanism, SEC has subpoenaed the online retailer Overstock and requested for additional information about the company’s ongoing $250 million ICO for its tZero alternative trading system.

Referring to cryptocurrency as the offspring from the underground world of nerds and criminals, a government keeps peddling about its becoming a mainstream investment, and hence the risk of complaints and scandals within crypto community blossoms.

Despite the resiliency of crypto investors to an ongoing onslaught of criticism, the sweeping probe significantly increases the regulatory pressure on the multibillion-dollar U.S. market for raising funds in cryptocurrencies. The Wall Street Journal reveals that it follows a series of warning shots from the top U.S. securities regulator suggesting that many token sales, or initial coin offerings, may be violating a law.

One of the first on stage to face the SEC review was a tech-driven online retailer Overstock with its ambitious project tZERO that is set to disrupt existing capital market and replace Wall Street with a blockchain-based token trading system.

According to Overstock CEO Patrick Byrne, the company launches the ongoing $250 million ICO to develop its tZERO token that will break the constraints of traditional financial industry in order to provide public and private companies with access to a global pool of funds for crypto securities.

For a couple of months since the tZERO’s early ICO starts, Overstock has reported to collected over $100 million out of tokens distributed to accredited investors. Therefore, it was not a coincidence, the U.S. Securities and Exchange Commission has decided to conduct investigation on a matter of any nefarious activities that might resulted into a fraud.

Overstock confirmed in a recently issued regulatory filing that its tZero ICO is subject to an SEC review. However, the company denied the awareness of a legal proceeding that would have an “adverse impact” on its business. The filing itself states that the investigation does not have to create any negative segment in company’s reputation, but Overstock saw its stock fall more than 10 percent following an SEC probe.

The filling reads:

In February 2018, the Division of Enforcement of the SEC informed the Company that it is conducting an investigation in the matter re: Overstock.com, Inc. and requested that the company voluntarily provide certain documents related to the Offering and the Tokens in connection with its investigation”

It continues:

“The SEC is trying to determine whether there have been any violations of the federal securities laws, the investigation does not mean that the SEC has concluded that anyone has violated the law. Also, the investigation does not mean that the SEC has a negative opinion of any person, entity, or security.”

In the meantime, many details of the ongoing fact-finding, including the number and timing of SEC inquiries remain unknown to the public. The president of tZero, Joseph Cammarata in optimistic tone commented on following, saying that the team of Overstock is actually happy that the SEC is scrutinizing the space.

He also added that Overstock has successfully finished its pre-ICO climbing the $100 million benchmark. The launch of its subsequent fundraising round is marked with a large technical change – the switch from managing crypto token sales platform SaftLaunch, to StartEngine that was developed for equity crowdfunding management.

According to Cammarata, tZero’s decision to switch platforms was not due to regulatory issues, but stems from SaftLaunch’s complicated and time-consuming anti-money laundering (AML) and know your customer (KYC) processes, which attracted huge interest to ICO. The sheer demand and influx of investors resulted into an extended presale period.

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