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The American CryptoFed DAO is said to have failed to thoroughly inform the SEC about its business, management, and financial condition.
The United States Securities and Exchange Commission (SEC) has announced an administrative proceeding on American CryptoFed DAO – the first DAO legally recognized in the US – for allegedly selling unregistered security tokens, the Ducat and the Locke tokens. The American CryptoFed DAO is registered in the state of Wyoming, where it provides services similar to the original Terra Luna ecosystem. According to a press release issued by the SEC, the agency’s Enforcement Division spotted discrepancies with the CryptoFed’s Form S-1.
American CryptoFed DAO Under the Radar of the US SEC
Reportedly, the American CryptoFed DAO failed to thoroughly inform the SEC about its business, management, and financial condition. The SEC further argued that the American CryptoFed DAO failed to inform whether the issued tokens were securities. Most importantly, the SEC noted that the American CryptoFed DAO failed to cooperate with the agency during the examination.
As such, the United States SEC intends to stop the American CryptoFed DAO from proceeding with its intended business implementation.
Moreover, the SEC would be held responsible for another ‘Terra Luna’ happening within its jurisdictions. Additionally, the Biden administration, through a recent White House directive, regulatory agencies were issued with powers to clump on crypto firms with ‘predatory’ operations.
“An issuer seeking to register the offer and sale of crypto assets as securities transactions must furnish the required disclosure information to the SEC,” said David Hirsch, Chief of the Enforcement Division’s Crypto Assets and Cyber Unit.
Nonetheless, the American CryptoFed DAO has defended its crypto operations as an economic liberation from the imminent fiat inflation. Meanwhile, the SEC is after crypto firms raising money through security like tokens and not registering them appropriately.
“American CryptoFed not only failed to comply with the disclosure requirements of the federal securities laws, but it also claimed that the securities transactions they seek to register are not, in fact, securities transactions at all. The Enforcement Division is seeking to stop American CryptoFed’s registration to protect investors against misleading information,” the SEC added.
The United States SEC has recently expedited its administrative proceedings on crypto firms under investigation for selling unregistered security tokens. Under the chairmanship of Gary Gensler – who has a strong foundation in blockchain technology, the SEC has made tremendous progress.
Nevertheless, one of its high-profile cases, the Ripple and XRP case, has gotten complicated after twelve major crypto firms successfully filed for amici briefs. The SEC is, however, persistent in avoiding issues similar to Terra Luna and FTX, which has significantly contributed to the ongoing crypto winter.
As such, the SEC will probably use these small cases against crypto firms selling unregistered securities tokens as a future model.