Initial Coin Offerings and Failure to Register – Securities Class Action Investigation

Initial Coin Offerings and Failure to Register- Securities Class Action Investigation

Chimicles Schwartz Kriner & Donaldson-Smith LLP (CSK&D) is investigating potential class actions brought on behalf of classes of holders of tokens or coins purchased through an initial coin offering (“ICO”). Over the last few years, many new companies seeking to develop and establish a digital platform, software, or other project, have resorted to raising capital by way of an ICO. An ICO is similar to any other type of public offering of securities except that the securities being offered involve unique units of digital currency, i.e. coins or tokens.  Individuals participating in the ICO convert real cash or currency to fiat currency and purchase the coin or token being offered during the ICO.

The Securities and Exchange Commission has determined that many tokens and coins offered through ICOs have all of the hallmarks of securities. As a result, those coins and tokens are not exempt from the registration provisions under federal securities laws, and the offer or sale of these securities are required to be accompanied by registration material that provides prospective investors sufficient information needed to make informed investment decisions. For the benefit of the investor, registration materials must include information about the issuer’s financial condition, the identity and background of management, and the price and amount of securities being offered. Without these disclosures, investors are exposed to losses on their investment arising from uninformed investment decisions.

The ICOs we are investigating involve tokens or coins that have not been registered as securities by the token platform founders or promoters.  Not registering these securities may be done in an effort to both circumvent federal securities laws and potentially capitalize on ill-informed investors. Following the closing of an ICO, the value of the token or coin can drop dramatically, causing purchasers/investors to experience large losses in terms of the percentage of their investments.

If you made an investment in an ICO, are holding a token or coin investment obtained through that ICO, and have sustained losses, we would like to speak with you about your investment and the ICO in which you participated.  If you would like to discuss a particular ICO with us, please contact the attorney(s) listed below by using the form provided.

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Attorneys for this case:

Kimberly Donaldson-Smith
Andrew W. Ferich