Key Takeaways
- • The SEC announced on September 11, 2018 its first enforcement actions against a hedge fund manager and brokers involving virtual currencies or digital tokens, according to CNBC and Dow Jones reporting.
- • Crypto Asset Management LP, the manager of a hedge fund, falsely advertised itself as the first regulated U.S. fund focused on crypto assets, the SEC said.
- • The SEC issued a cease-and-desist order and a $200,000 penalty against Crypto Asset Management LP, per SEC materials, and said founder Timothy Enneking illegally sold fund stakes to U.S. investors.
- • Two men who operated a website billed as an "ICO superstore" for connecting buyers with initial coin offerings were also penalized, in a separate case the SEC described as another first.
- • The actions mark a new front in U.S. regulatory oversight of digital asset markets, extending enforcement from token issuers to fund managers and intermediaries.
Summary
The Securities and Exchange Commission on Tuesday, September 11, 2018, fined a hedge-fund manager and two men who ran a cryptocurrency-selling website in two separate cases, according to CNBC, which reported that the settlements represent a new front in the government's campaign to police the market for digital assets. The settlements are the SEC's first actions against a hedge fund and brokers involving virtual currencies or digital tokens.
In the hedge fund case, the SEC said Crypto Asset Management LP falsely advertised that it was the first regulated fund in the U.S. focused on crypto assets. The SEC entered an order finding that the firm offered a fund that operated as an unregistered investment company. Per SEC materials, the agency issued a cease-and-desist order and a $200,000 penalty, and it said founder Timothy Enneking illegally sold stakes in the fund to U.S. investors.
In the second case, the SEC said a brokers' website was billed as an "ICO superstore" for connecting buyers with initial coin offerings, a popular method of raising money from individuals that often violates investor-protection laws. The agency described the action as another first in the government's crypto enforcement efforts.
Taken together, the cases signal that the SEC is extending its enforcement reach beyond token issuers to fund managers and intermediaries that offer exposure to or access to digital assets. For institutional allocators, the matters underscore the regulatory scrutiny applied to claims of registration status and investor eligibility in crypto-related vehicles.
In the hedge fund case, the SEC said Crypto Asset Management LP falsely advertised that it was the first regulated fund in the U.S. focused on crypto assets. The SEC entered an order finding that the firm offered a fund that operated as an unregistered investment company. Per SEC materials, the agency issued a cease-and-desist order and a $200,000 penalty, and it said founder Timothy Enneking illegally sold stakes in the fund to U.S. investors.
In the second case, the SEC said a brokers' website was billed as an "ICO superstore" for connecting buyers with initial coin offerings, a popular method of raising money from individuals that often violates investor-protection laws. The agency described the action as another first in the government's crypto enforcement efforts.
Taken together, the cases signal that the SEC is extending its enforcement reach beyond token issuers to fund managers and intermediaries that offer exposure to or access to digital assets. For institutional allocators, the matters underscore the regulatory scrutiny applied to claims of registration status and investor eligibility in crypto-related vehicles.
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