Securities Regulator Amps Up Warnings on Digital Coin Offerings

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By Steve Burkholder

U.S. securities regulators continue to put heat—including warnings to adhere to accounting rules—on a new trend in raising capital for startups: issuing virtual coins or tokens that amount to having a stake in an emerging enterprise.

Wesley Bricker, chief accountant of the Securities and Exchange Commission, reiterated the agency’s view—made known in July—that the activities of “decentralized autonomous organizations” amount to securities offerings subject to registration by the SEC.

Bricker went beyond that, telling auditors and banking industry accountants that such unincorporated organizations should follow applicable accounting principles, disclosure rules, and other financial reporting guidance to which public companies and other SEC registrants adhere.

“The SEC’s registration requirements, including for securities offerings, include various requirements for filing of audited financial statements,” Bricker said Sept. 11 at the national banking conference of the American Institute of CPAs.

In recent months, start-up companies have raised hundreds of millions of dollars—sometimes literally within minutes—by selling tokens or making initial coin offerings, avoiding securities regulation. In July, the commission announced the end of its investigation of an organization known as The DAO.

Stern Warning in Probe of ‘The DAO’

The SEC didn’t pursue enforcement action against The DAO, but issued a stern warning to those who engage in token or initial coin issuances that add up to investments in enterprises.

Bricker repeated a warning in the SEC’s July 25 release in The DAO probe—(Release No. 81207. The DAO raised about $150 million in four weeks.

“The report makes clear,” the chief accountant said, “that the federal securities laws apply to those who offer and sell securities in the U.S., regardless of:

  •   “whether the issuing entity is a traditional company or a decentralized autonomous organization;
  •   “whether those securities are purchased using U.S. dollars or virtual currencies; or
  •   “whether they are distributed in certificated form or through distributed ledger technology.”

To contact the reporter on this story: Steve Burkholder in Norwalk, Conn. at

To contact the editor responsible for this story: S. Ali Sartipzadeh at

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