Corporate watchdog stops initial coin offerings amid ‘misleading’ marketing
The corporate watchdog has stopped several initial coin offerings and a cryptocurrency investment scheme, citing misleading sales and marketing among other problems.
The watchdog said it had identified “consistent problems” including “misleading or deceptive statements in sales and marketing materials, operating an illegal unregistered managed investment scheme and the absence of an Australian financial services licence.
“You should not simply assume that using an ICO structure allows you to ignore key protections there for the investing public and you should always ensure disclosure about your offer is complete and accurate”, Australian Securities and Investments Commission boss John Price said in a statement.
An ICO is like an initial public offering — but instead of offering shares, an issuer offers digital tokens that can be traded on cryptocurrency platforms or swapped for services.
The watchdog describes ICOs as “highly speculative investments that are mostly unregulated — and while there are genuine businesses using this structure many have turned out to be scams.
“If you raise money from the public, you have important legal obligations,” Mr Price said. “It is the legal substance of your offer — not what it is called — that matters.”
The watchdog has put on hold five ICOs since April — and was also taking action on a completed ICO as well as putting a final stop order on a proposed cryptocurrency fund.
Last week ASIC issued a final stop order on a Product Disclosure Statement issued by Investors Exchange Limited for units in the New Dawn Fund which was planning to invest in cryptocurrencies.
“ASIC acknowledges the co-operative approach taken by IEL in responding to ASIC’s concerns.”