US CryptoFed registration at risk as SEC claims filing anomalies


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Disclaimer: The article has been updated based on an official response from the American CryptoFed DAO. COO Xiaomeng Zhou explained why the SEC is not legally allowed to issue a stop order.

American CryptoFed DAO, the first Decentralized Autonomous Organization (DAO) To obtain legal recognition in the United States, he is at risk of losing his registration after the U.S. Securities and Exchange Commission (SEC) detects deviations in his Form S-1 registration statement dated September 17, 2021.

The Wyoming Secretary of State’s office has recognized CryptoFed USA as Legal entity in July 2021At the time, the CEO of the foundation, Marian Orr, believed that “Wyoming is the highest-ranking blockchain jurisdiction in the world.”

However, on November 18, 2022, the Securities and Exchange Commission (SEC) filed administrative proceedings against the DAO to determine the issuance of a stop order. A stop order from the Securities and Exchange Commission (SEC) would withdraw CryptoFed’s US registration and ban internal token sales, Ducat and Locke.

according to To the Enforcement Division of the Securities and Exchange Commission, Form S-1 Registration Statement Filed by CryptoFed of the United States Lacks vital information Such as audited financial statements and details related to its business and management. The SEC further held that CryptoFed’s US filing contained “misleading statements and omissions” while contradicting the description of the tokens as securities.

In this regard, David Hirsch, Head of the Crypto and Internet Assets Unit of the Law Enforcement Division, stated the following:

“Not only has American CryptoFed failed to comply with the disclosure requirements of the federal securities laws, but it has also claimed that the securities transactions they seek to record are not, in fact, securities transactions at all.”

Hirsch explained that issuers must provide required disclosure information to the Securities and Exchange Commission. However, the SEC claimed a lack of cooperation from CryptoFed of America during its examination of its registration statement.

Based on the information made publicly available, Hirsch shared the SEC’s intent regarding the DAO:

“Department of Enforcement seeks to stop CryptoFed’s US registration to protect investors from misinformation.”

Speaking to Cointelegraph, COO and U.S. CryptoFed regulator Xiaomeng Zhou argued against the SEC’s claim, stating that the Section 8(d) order can only be applied to effective registry data. To the extent a Section 8(d) order applied to a registration statement, which is “pending and not yet effective,” is applied to the wrong subject and is illegal because the “effectiveness of the registration statement” has not yet existed and an order cannot Section 8(d) Discontinuation of Non-Existent Subject.

For a US CryptoFed DAO Form S-1 registration statement that is “still pending and not yet effective,” it is the subject of a Section 8(b) denial order of the Securities Act of 1933 which clearly states “The Commission may, […] issue an order prior to the effective date of a registration refusing to allow such statement to become effective until it has been amended in accordance with such order.

As a result, the US CryptoFed DAO’s Form S-1 is the subject of Section A and Section 8(B) of the Securities Act of 1933, according to Zhou. he added:

“Section 8(b) of the Securities Act of 1933 only allows the SEC to issue an order of denial to provide more clear instructions for the American CryptoFed DAO to complete Form S-1 for registration (not a stop order).”

Chu reiterated that Section 8(b) of the Securities Act of 1933 allows the SEC to issue a refusal order and provide clear instructions for completing the S-1 filing form. However, it does not allow the federal agency to issue a stop order:

“As a result, the SEC misused the Securities Act of 1933 to illegally delay, stop, and obstruct the legitimate disclosure of the US CryptoFed DAO through its Form S-1 filing statement.”

Cointelegraph found that the DAO’s official Telegram channel has been disabled.

The official Telegram account for American CryptoFed could not be found. Source: Cointelegraph (via Telegram)

However, the Telegram account deletion was not yet connected to the SEC’s investigation at the time of writing.

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