The latest statistics on initial coin offerings suggest that the best days of the fundraising mechanism may have long passed.
According to digital assets newsletter Diar, the month of November recorded the lowest inflows into initial coin offerings (ICOs) in 2018. With US$65 million raised last month, this was in sharp contrast to this year’s best-performing month, February, when US$2.6 billion was collected. It is also a tiny fraction compared to the US$12.2 billion that has been raised so far this year in ICO issuances.
Prior to November, the worst-performing month had been September when US$180 million was collected by issuers, almost three times the amount that went into ICOs last month.
The declining fortunes of ICOs come at a time when there is a slowdown in the cryptocurrency markets. This has also coincided with increased regulatory scrutiny in certain jurisdictions such as the United States.
Mid this year, the chairman of the U.S. Securities and Exchange Commission, Jay Clayton, stated that ICOs are securities. Since then there have been a number of ICO issuers who have come under the ire of the SEC after being found to have been in violation of securities laws.
ICOs are Securites, ‘Don’t Know How Much More Clear I Can Be’: SEC Chairman https://t.co/zHhRLYVy0B via @cryptocoinsnews #duly #blockchain #fintech #420 #banking #wallstreet #altcoin #money #dollar #cryptonews @duly #god #token #ico
— Duly (@dulytweet) 14 Haziran 2018
Last month two blockchain startups Airfox and Paragon each reached a settlement of US$250,000 with the U.S. Securities and Exchange Commission over failure to register their ICO tokens as securities. The settlement deal also gave the affected investors the greenlight to request a refund from the two ICO issuers, raising the prospects of bankruptcy for the two firms.
“The orders impose $250,000 penalties against each company and include undertakings to compensate harmed investors who purchased tokens in the illegal offerings,” said the SEC in a press release as CS reported. “The companies [Airfox and Paragon] also will register their tokens as securities pursuant to the Securities Exchange Act of 1934 and file periodic reports with the Commission for at least one year.”
Federal Law Violation
Earlier this month, the SEC slapped a US$50,000 fine on CoinAlpha Advisors for distributing unregistered securities.
SEC Slaps Crypto Firm with $50,000 Fine for Selling Unregistered Securities https://t.co/zHLW6ig0c9
— CCN (@CryptoCoinsNews) 8 Aralık 2018
As CS reported at the time, CoinAlpha Advisors violated federal laws by failing to register its business. Additionally, an application to be exempted from a distribution license had been made by the firm but the criteria for approval was not met.
Celebrity endorsers of ICOs have not been spared either by the SEC. Late last month, the U.S. markets regulator slapped music producer DJ Khaled and boxing champion Floyd Mayweather Jr with charges of illegally promoting ICOs. A settlement was eventually reached with the two stars paying a combined US$767,500 to the SEC and a commitment not to promote any securities for a couple of years.