The Securities and Exchange Commission (SEC) has announced two enforcement actions in the crypto space this week. ICO platform TokenLot and cryptocurrency hedge fund Crypto Asset Management LP (CAM) have been shut down by the regulators. The agency described both actions as the first of their kind.
As per the press release about the action against CAM, “its sole principal Timothy Enneking raised more than $3.6 million over a four-month period in late 2017 while falsely claiming that the fund was regulated by the SEC and had filed a registration statement with the agency.”
According to the SEC, it is its “first-ever enforcement action finding an investment company registration violation by a hedge fund manager based on its investments in digital assets.”
“Hedge funds seeking to ride the digital asset wave continue to proliferate,” the SEC’s Asset Management Unit co-chief C. Dabney O’Riordan said. “Investment advisers must be sure that the funds they offer adhere to the applicable registration obligations and must accurately represent their funds’ regulatory status to investors.”
CAM consented to the sanctions order that asks the fund to halt operation and settle a $200,000 penalty.
Billed as an “ICO Superstore,” TokenLot, which is run by Eli Lewitt and Lenny Kugel, has also been ordered to cease operations. As per the order, it “operated a website platform through with the company marketed and sold digital token to investors.”
The SEC said that it “is the SEC’s first case charging unregistered broker-dealers for selling digital tokens” since the release of the DAO Report which concluded ICOs qualify as securities and therefore would be subject to SEC oversight.
The sanctions bar Lewitt and Kugel from “association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.” It also prohibits them from offering any stock, but they can apply to have these bans lifted after three years. The two are also ordered to return the $471,000 they made, including the interest, and settle a $45,000 fine apiece.
TokenLot’s website presently features only a note to clients, stating that “due to the ever-changing regulatory landscape of the cryptocurrency space in our jurisdiction, we regret to inform you that we will be closing TokenLot.”
TokenLot has appeared in the news before. In 2017, Confido, which conducted its ICO via TokenLot, disappeared shortly after raising $375,000. At the time, Lewitt called the Confido team “very good scammers.”
Following the SEC head Jay Clayton’s famous assertion that “each ICO I’ve seen could be a security” and the DAO Report, these actions are likely just the beginning of the agency’s more aggressive attitude toward crypto regulation.