Our Voices

SEC Suspends Trading of Several Blockchain Companies

By Alexandra Levin Kramer, Partner and Chair, Blockchain Technology & Digital Currency, Michael James Maloney, Partner and Global Chair, Litigation and Dispute Resolution, and Jeffrey A. Rinde, Managing Partner of CKR Law, International Securities and Global Finance

In the space of roughly 2 weeks, the U.S. Securities and Exchange Commission (the “SEC”) has temporarily suspended the over-the-counter trading of shares of 2 blockchain related companies pursuant to Section 12(k) of the U.S Exchange Act of 1934.

Yesterday, the trading of the shares of First Bitcoin Capital Corp. (BITCF), a Canadian company, was suspended by the SEC. According to its Q3 2016 report, the company “expanded its principal business into the high technology field of digital crypto currency” in 2014, including developing a bitcoin exchange and an e-commerce marketplace that accepts digital currencies. In its August 23, 2017 release, the SEC raised concerns regarding the accuracy of public information that the company disclosed including, among other things, “the value of BITCF’s assets and its capital structure.” Consequently, the company released a statement advising investors that they have retained counsel to work with the SEC but claimed that the suspension was due to a “misunderstanding” while applauding the SEC for suspending two other cryptocurrency companies that were “either mimicking BITCF for publicity or were obvious scams."

Previously, on August 10, 2017, over-the-counter trading of the shares of CIAO Group, also known as Numelo Technology (CIAU), a Nevada corporation, was suspended by the SEC. In its August 9, 2017 release, the SEC questioned the accuracy of public statements by the company regarding its business plans including a “$530 Billion Blockchain and Cryptocurrency Target Market Collaboration With Hub Culture” and its future initial coin offering.

This follows another SEC suspension of the trading of the shares of Sunshine Capital, Inc. (SCNP), a Florida corporation, on April 12, 2017. In its April 11, 2017 release, the SEC also questioned the accuracy of this company’s public statements regarding, among other things, the liquidity of its own cryptocurrency, the “DIBCOIN.” Two weeks after the expiration of the suspension, the company filed a petition to lift the suspension, which the SEC claimed should be dismissed as untimely, subject to its order requesting additional written submissions by the parties. 

CKR Law believes that SEC regulation and enforcement in this industry ultimately benefits legitimate enterprises and unsophisticated investors, in particular. This legal guidance from the regulators is actually critical to such market and sector participants and further legitimizes the industry.

As the blockchain technology industry has grown to become a major source of capital while digital currency has become more recognized and accepted globally, the market is facing increased pressure from regulators and investors to enforce existing securities rules and regulations and other applicable laws.  In response, CKR Law has launched a Blockchain Technology Task Force that provides a global and full-service solution to help investors and companies in the industry mitigate the risk of, as well as navigate the defense of, litigation and SEC or other regulatory actions facing them or those with whom they may be affiliated.

Members of this Task Force include our global experts in securities and corporate governance, as well as our litigators. Our global team is experienced in advising and defending our clients in all types of legal matters, proceedings, arbitrations and government actions in the U.S. and other foreign countries.  Our Blockchain Task Force members can advise clients as to regulatory compliance, mitigate the risk of litigation, allegations, and investigations, and defend clients if such matters arise.

Questions or Concerns?

Clients active in or intending to engage in activities in the blockchain technology industry or with concerns about investments in blockchain technology companies or holdings of digital currency are strongly encouraged to contact CKR Law at:

Alexandra Levin Kramer, akramer@ckrlaw.com
Michael James Maloney, mmaloney@ckrlaw.com
Jeffrey A. Rinde, jrinde@ckrlaw.com