Increasingly frequent action taken by the SEC against initial coin offerings is expected to lead to more cryptocurrency projects being forced to refund investors. Among those expected to be affected is the first U.S.-based cryptocurrency investment firm, Pantera Capital, with the company bracing to receive refunds on a quarter of its ICO investments.
Pantera Capital Anticipates a Quarter of ICOs in Portfolio May Be Targeted for Securities Violations
In a letter written by Dan Morehead and Joey Krug, Pantera’s co-chief investment officers announced the company’s expectation that one in four of its ICO investments will be deemed to comprise unlicensed securities. If that proves to be the case, the projects may be compelled to issue refunds to investors. The concerns have been sparked by the SEC’s Nov. 16 announcement that coin offerings Paragon Coin and Carriereq had issued tokens to non-accredited investors in violation of securities laws.
The letter states: “While we believe the vast majority of the projects in our portfolio should not be affected, approximately 25 percent of our fund’s capital is invested in projects with liquid tokens that sold to U.S. investors without using regulation D or regulation S,” adding “If any of these projects are deemed to be securities, the SEC’s position could adversely affect them.”
Further elaborating regarding the projects of concern, the letter estimates that “about a third (approximately 10 percent of the portfolio) are live and functional,” noting that “while they could technically continue without further development, ending development would hinder their progress.”
Pantera-Backed Paragon Coin Targeted by SEC