SEC Emergency Action Halts PlexCoin ICO | Hacker News Reader

SEC Emergency Action Halts PlexCoin ICO

sec.gov

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> [The SEC] obtained an emergency asset freeze to halt a fast-moving Initial Coin Offering (ICO) fraud that raised up to $15 million from thousands of investors since August by falsely promising a 13-fold profit in less than a month.

To me, the PlexCoin homepage [1] is indistinguishable from all the other ICO homepages I've seen.

- bootstrap homepage: check

- beautiful graphics with actors and coins: check

- unclear statement what the company is or will do: check

[1] https://www.plexcoin.com/

> PlexCoin is the next decentralized worldwide cryptocurrency, based on the Ethereum structure. Its mission is to broaden the possibilities of uses and to increase the number of users by simplifying the process of managing cryptocurrency to the maximum.

But they're going to simplify the process of managing cryptocurrency to the maximum!

needs moar synergies!!

Its pretty low hanging fruit, the issuer was someone they had previously sancitoned and was probably prohibited from issuing Securities-like things for several years

That and promising a particular return, no ambiguity on the expectation of profit, directly from the issuer!

I tend to agree. Every ICO page mainly struggles with number 3. I never get what they are selling, probably because they're not selling anything other than the idea of buying in to their ICO.

Let's take a (somewhat snarky and definitely superficial) look at a few of the "top gainers" & market cap from https://coinmarketcap.com/gainers-losers/ (as of Dec 2nd)

Gainers:

1. Petrodollar.. Website isn't even an owned domain.

2. BTCMoon - Well their website works, but it speaks just heavily of the token offering not what it does. Personally I like the first question in the FAQ: "Q: Why BTCMoon are there? " Which is as close to the pseudo-philosophical question of "why is the moon" as we can get.

3.iQuant - Nearest I can tell, a blockchain trading platform. They're the closest to actually telling me something, but their ICO ended so maybe thats why.

Market cap.

1. EOS - Just talks about the ICO offering over and over. No idea

2. OmiseGo - "OmiseGO is a public Ethereum-based financial technology for use in mainstream digital wallets, that enables real-time, peer-to-peer ...." I'm sorry we've reached our buzzword quota for the day.

3. Tether.. Well we'll leave that one where it lands.

Ok so its super snarky and highly superficial, but in all cases, the basic question of "What are you selling" isn't answered clearly and concisely. I just don't get it but if the requirement is either;

A. Drink the ICO cool-aid and you'll get it

B. "You have to think beyond how they'll sell to consumers, these are like platforms with boundless potential"

Then I don't want to get it, because ambiguity is definitely something investors should avoid.

Tether is not an ICO and quite clear what it does. It is supposed to be a token that pegged to USD to facilitate the moving of USD via the blockchain instead of having to bother with the pain and fees of banks.

Its market cap rises as more USD is deposited into their banks.

Sadly there is a lot of red flags indicating that this is not the case, they haven't had banking since April so there are no way to deposit funds to them for regular users at least.

Also, one employee from Bitfinex suggested on reddit that Tether is funded by crypto deposit to them and not USD...

The tether scandal is highly concerning. Essentially Bitfinex and Tether are owned by the same people, the Tethers issued do not appear to be backed by USD, and there are almost a billion tethers issued - which many believe is responsible for the increase in BitCoin.

They've claimed they are ready to release audit details for 2+ years (no audit), and the founding team has also gone on the record about wash trading and other fraudulent financial activity.

Additionally, Bitfinex had some 'flash crashes' that wiped out people's margin accounts. Some believe the flash crash was caused by Bitfinex themselves on purpose to accomplish this exact goal.

Stay up to date at https://www.twitter.com/bitfinxed & https://reddit.com/r/bitfinex

Wow, really? I don't know how you can phrase that objective without admitting to money laundering (or some ancillary financial crime).

To be fair about EOS, there is a technical whitepaper, very active github, and a development blog.

https://github.com/EOSIO/Documentation/blob/master/Technical...

https://github.com/EOSIO

https://steemit.com/eos/@eosio/eos-io-dawn-2-0-released-and-...

The test network just went live.

It's almost like we told an entire generation of people "write code, get rich" and then created the means for the most unscrupulous people to do so.

I know a lot of talented folks working in blockchain tech and I can only count two that I know for certain aren't in the space chasing 'fabulous wealth'.

Some more checks done: - Roadmap: check

They're missing the Whitepaper and Telegram group though. I assume the later would be used to pump the ICO.

This is indistinguishable... really? This is so obviously a scam it hurts. The first sentence doesn't even make sense, let alone have proper grammar.

Maybe they adopted the same strategy as those Nigerian 419 scams. The tortured grammar drives away rational punters, leaving only the patsies.

>The first sentence doesn't even make sense, let alone have proper grammar.

Sadly this is the case for many "legitimate" ICOs. Understand legitimate as non-fraudulent.

At first they were even using Visa logo, promising a Visa card that would use Plexcoins. They never even contacted Visa.

A redditor eventually warned Visa about this and they required Plexcorp / DL Innov / Dominic Lacroix to remove all mention of Visa.

Lots of subtle issues with grammar and voice too...

Seems like a 419-style thing -- it's designed to scare sophisticated investors away, and attract only rubes.

This kind of says more about your ability to judge businesses (and specifically ICOs). Not a big surprise, considering that judging businesses and valuating them is a a profession in itself, and it takes people many years to become proficient in it.

If you cannot get even a glimpse from this webpage, that this specific ICO is likely a scam, you should not invest in ICOs. You will likely not be able to tell which ones (the 1 out of 100) are likely legit, have serious people behind them, and on top of that have an actual sound idea that has a good chance of working. But it's kinda the same with stocks.

No it isn't. You can create an ICO with a github account and dodgy php. To create a company and list it, it is a wee bit more complex.

You don't have to list it in order to scam people with it. They can buy stocks even in non-listed companies. At least not listed on major exchanges. While it might be easier to make a compelling ICO, registering a scammy company is also relatively easy (1k-2k USD). Or perhaps a bit more if you want to come up with some questionable tech and defraud some VCs with experience. It has been done, it is still being done. Up to this point it has been somewhat harder to get away with it though. Now hopefully it will be harder to get away with a scam ICO too.

The point is, if you are out there trying to invest your money, and you don't have any idea about how to judge people, how to judge business models, how to judge the underlying tech - you will loose money. Whether it's an ICO or a regular company selling it's equity using traditional methods.

And that is why securities are regulated.

It looks like the site is down. Here's a mirror: https://web.archive.org/web/20171204230017/https://www.plexc...

Zhang should really update the page for the 'block-chain-coins' era: http://tiffzhang.com/startup/?s=785536181453

It sounds like the key difference from the typical ICO page is the promise of a 13 fold return.

I'm curious to see how they managed to phrase the promise, but it seem to have been removed from the page.

Their slogan is pretty funny: "The next cryptocurrency." Like the last one, only newer.

This is a typical SEC action against a get-rich-quick Ponzi-type scheme. Read the SEC's note on Ponzi schemes.[1] The original Charles Ponzi only promised a 50% return in 90 days. Bernie Madoff promised about 10-15% a year. This "ICO" promised 1300% in 30 days.

[1] https://www.sec.gov/fast-answers/answersponzihtm.html

If you can get in early and you recognize it for what it is, a Ponzi scheme can be just another rational investment.

Madoff's clients made good returns for a long time. From the perspective of each long term individual investor, the problem was that they did not fold and walk away from the table with their winnings after a few years. The scheme would have survived a few of those, and maybe some investors did.

None of which is to imply that I think Ponzi schemes should be legal. I'm not a libertarian.

Only if they actually pay out withdrawals.

True any time you hand over a pile of money with the expectation that the recipient will give you more back.

Good. The first step to establishing a regulatory framework is defining boundaries of acceptable behavior by shutting down egregious violations.

What about the folks who love cryptocurrency specifically because of the fact it is unregulated? Are we not doing that anymore?

"Regulation" isn't a one-dimensional thing.

You can simultaneously hate scam ICOs and still not want most other aspects of cryptocurrencies to be regulated. There are lots of different regulations that different people find acceptable.

I agree - I'm an attorney. But are we picking and choosing here? Because my bet is, and has been for quite sometime, that when all is said and done, the 'regulations' we are talking about are those that already exist and are applied to securities.

Yes, we are picking and choosing. We’re picking out individuals that are motivated to love unregulated financial instruments because it’s easier to defraud the populace and choosing to shut them down

I'm sure that most of securities law will apply, but there might be new opportunities provided by the tech that need to be worked out - for instance funding protocol development.

The innovation also might also shift political attention to some drawbacks with the current regulatory regime that could use updating - for instance the rather blunt instrument of the accredited investor regime, or the custodian requirement.

And the regulators will have to deal with changes to their own incentive structures - for instance the opportunity for regulatory arbitrage.

For all the mistrust of banks and regulators in Bitcoinland, having those institutions take you seriously is what winning looks like.

I flagrant scams run unchecked eventually crypto will get the reputation of being "just for scams." This will harm it in the long term greatly.

They are not talking about regulating regular cryptocurrencies, which are openly a risky investment.

ICOs like this are trying to defraud and scam people, making them believe that their token is something it's not.

I don't think any honest investor and/or developer wants the second case to be unregulated, nor gains anything from it being so.

If anything, regular cryptocurrency enthusiasts are loosing because of this, because the whole crypto space gains bad notoriety because of these ICOs, and people who cannot tell a difference between ICO, an ERC20 token, a private address, bitcoin, bcash, litecoin, etc, etc - people who think they are all the same - will just form a faulty opinion that since there are scam ICOs out there, that means that the whole crypto space is a scam. Everyone would win if these scams were regulated and punished.

Woah, back up here. Cryptocurrencies are not unregulated, they are very much regulated. Those people you are referring to like the fact that they are self-regulating. If they were completely unregulated then bitcoin would have never gotten off of the ground.

I personally think that cryptocurrencies could do for a lot more regulation, not just from governments but also from public advocacy groups. We need to be carful about the kind of regulations.

The AMF had already found him guilty of the same and barred him from soliciting, directly or indirectly, investors for PlexCoin [0]. It's not the first time he gets in trouble, he had a lending "company" that was investigated and was barred from participating anymore [1]. All links in French sorry.

[0]: https://lautorite.qc.ca/grand-public/salle-de-presse/actuali... [1]: https://lautorite.qc.ca/grand-public/salle-de-presse/actuali...

This appears to be an English version of [1]: https://lautorite.qc.ca/en/general-public/media-centre/news/...

People might not be so eager to dump money into these scam investments if the government hadn't strangled legal and regulated equity crowdfunding. The SEC needs to look at ways to allow people to invest in legitimate opportunities, not just shut down scams. The JOBS act has been a bust in this regard as far as I can see.

That's just trading one problem for another. We'd just see a big increase in equity crowdfunding scams instead

There's pretty sound reasons why non-accredited investors can only invest in public tradable assets. Accredited investors can get into non-public companies if they earn a high enough income such that they can take that kind of volatility. For students fresh out of college that should focus on saving, it is not a great idea to throw those savings into non-public startups. It sure sounds tempting, but many times over has been shown to be the most risky asset class.

It could be argued that a student has lots of earning potential left in their life, so their risk tolerance is actually higher than someone, say, near retirement on a fixed income.

I get what you are saying though. For most people it is not an appropriate investment, hence the accredited investor rules.

People should be allowed to make risky investments if they want, especially if they keep that risk to a small percentage of their portfolio. Besides, the lotto and casinos exist and are still allowed in most places, which is basically what you're leaving these people to do (and what I've seen many younger people waste their money instead).

Isn't it this very website where people over and over again say that the best time to take a risk is when you're young, anyway, and don't have any responsibilities?

There's a difference between risky investments and outright scams, though, and I'm fine if the government steps in and stops the scams, although I worry that they'll start seeing every single ICO as a scam and want to stop all of them (to be fair, it almost seems like they all are right now to me as well).

That's one of the nice things about the rise of cryptocurrencies, actually, is it's allowed younger people to make bets that have wildly paid off for them, that would otherwise not been available to them. It was risky as hell for sure, but for those people that only put in what they could afford to lose, it's outperformed every other investment by many many times this past year.

People can already make a risky investment, by just buying public stock on the public markets.

So there's no reason why they shouldn't be able to make other risky investments, right?

Public companies have strict auditing rules, and other controls that prevent insiders, or a small group of people colluding with insiders from ripping off other investors.

This is not the case with private firms, and doubly-so for ICOs.

There's risky investments, and there's walking around the bad part of town after dark, wearing a blindfold, with two wallets in each hand, hoping you'll find a winning lottery ticket on the ground.

The regulations are more about regulating the ability to make money off of naive investors, in my view. You should be able to offer the ability to make risky investments to people, but there should be enforcement mechanisms to ensure you're not misleading people.

People really dont understand how accesisble buying crypto is in comparison to typical asset classes, specially outside the U.S.

To open a brokerage account in argentina, you have to physically go to an office to sign up, and pay thousands of dollars upfront to just open an account.

Banks are also a hassle to open an account at, since they charge you 20-50U$S a month plus comission charges are in the 4-5% on funds.

Bitcoin was great because it was also an easy way to receive funds as a kid (circa 2010).

Not being regulated has been the greatest advantage to the crypto market.

Augh, damn these lawmakers and their heavy-handed efforts to prevent fools being separated from their money.

We need to do some serious advocacy around this issue. Hacker news is surprisingly pro-investment restriction, which I could expect from hardcore VC's, not regular folks that look at startup news every day.

I think that's a very insightful statement.

Right now regular people only have a few different options to invest in:

1. Stocks

2. Bonds

3. Cash

4. Your own bootstrapped business

5. Cryptocurrencies

6. Lottery

The first 2 are obviously limited growth opportunities... Corporations are already massive, people will never get the 100x or 1000x returns that they need to actually notice any lifestyle difference... And even if they did, by that point the world would be a horrible place not worth living in and you'd be near the bottom of the pile because you got in too late.

Interest rates are too low so holding cash is pointless.

In this VC-dominated and corporation-dominated landscape, the odds of successfully bootstrapping your own business are near zero and everyone knows it.

Lottery usually appeals to the working class due to the large potential payoffs. But everyone knows that the odds are terrible and that there are middlemen taking a cut.

Cryptocurrencies on the other hand are like a giant international startup which aims to disrupt the entire financial system and which is in a very good position to do so because everyone is in on it. The returns are great and the odds are much better than lottery.

Why do you think that it's a reasonable expectation that an economy offers a 1000X multiplier on your money? Where is this value supposed to come from? By altering the means of exchanging capital a significant number of people get 1000X richer?

Those kinds of gains can only come at the expense of other "investors".

Yes, assuming that cryptocurrency takes over and it becomes a whole new ecosystem, the gain will be at the expense of everyone who doesn't hold cryptocurrency especially the wealthy elites whose net worth is mostly tied up in the current fiat system.

More people will start offering services on a blockchain and anyone with computing power will be able to run a node for the service and will profit directly from customer payments made to their blockchain address.

The key here is that anyone with moderate technical skills will be able to assist in providing a service by setting up a node on the relevant blockchain - It's not like in the current fiat system where I can't just run my own machine to help service Google users for example (in exchange for a commensurate portion of the proceeds).

It's a fundamentally better system because it takes out the middleman. The current fiat system is all about locking people out while the new system will be able making it impossible to lock people out of opportunities.

> especially the wealthy elites whose net worth is mostly tied up in the current fiat system

Single parents hovering at the poverty line also have their entire net worth tied up in the current fiat system and they're far more likely to be hurt than someone with the means to be flexible

Hurt?

Their net worth is negative.

They'd love nothing more than seeing their net worth rise to $0.

Plexcoin, summarized:

>"Security is very important to us. That's why we invented a new type of encryption system based on your private virtual currency address, so it is unencyptable."

Come up with a new encryption system and tell the world it's unencryptable... I'll just leave this one hanging. Source: Plexcoin blog (https://www.plexcoin.com/blog/important-statement)

Well, it says "undecryptable" now...

".... based on your private virtual currency address, so it is undecryptable."

But that makes me think it cannot be decrypted, which is pretty bad for an encryption system. If you cannot decrypt the data, it might as well be random noise ...

Even if this statement is pristine, it's still pretty flagrant:

> August 10, 13h00 GMT

> We implement a unique encryption system that uses a portion of your private PlexCoin address to encrypt your email address, your password and your wallet. Security is very important to us. That's why we invented a new type of encryption system based on your private virtual currency address, so it is undecryptable.

I mean, even in context, what does this mean? "Security is very important to us."

We had a similar thing happen a week or so ago in New Zealand, with the Financial Markets Authority warning against an ICO: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&o...

The ICO was later withdrawn: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&o...

Basic rundown: 19 year old "serial entrepreneur" buys a Carosell [0] (similar to craigslist) clone script for a couple of grand (apparently he claimed to have made it himself), claims to have millions of users after a couple of months, and then tries to launch an ICO. It was a blatant scam, he was called out for it, and ended up cancelling the ICO, and promising to return all the money.

[0] https://en.wikipedia.org/wiki/Carousell_(company)

It's worth noting the SEC describes the perpetrator as "a recidivist Quebec securities law violator". Apparently this isn't the first scam he's run.

Did not know SEC has jurisdiction over Canada, thanks.

They're not claiming it. They're noting that the person in question has a history of securities law violations.

This is really good to see. Separating the scam ICOs from the non-scam ICOs is only going to become more important in the future.

I can't envision a future where they are anything but a scam. The tokens have no legal or economic connection to any business activity produced by the token creators so I don't see why any ICO token would be worth any more than any other besides hype.

They seem like Kickstarter bred with stocks - mostly an unenforceable promise of future products/services/magic to the users who buy the initial coins.

An employee where I work recommended we do our own ICO, but for the life of me, I couldn't figure out what it was that the coins would eventually be exchanged for. Maybe I'm just too dumb - he's objectively smarter than me, I'll freely admit - but it seemed not too different from shaking a cup to passersby.

This flaw has not stopped many ICOs!

Yeah, being very smart doesn't seem to be an effective inoculant against blockchain hysteria. Then again, the ICO scammers are making millions and I'm not, so, maybe I'm getting ahead of myself.

Sort of. For situations where the coin represents some ambiguous "share" of the project, absolutely.

However, when the tokens are used as an incentive mechanism for a fledgling decentralized network, I think it makes a bit more sense. Things like Sia or Storj or Ether or Ark where the token is there to function as a cost/reward for using/providing the service that the network provides (filestorage, smart contracts, decentralized cryptocurrency exchange) I believe that it actually does have some intrinsic value.

Although I am skeptical of the utility of 99% of these decentralized networks (Storj seems at least a worthwhile experiment), I think that's a fair distinction since the blockchain logic can ensure that tokens represent some stake in the decentralized network.

I think even in most of those cases it would make more sense to use Bitcoin or Ethereum, which users are more likely to already have, and will likely be less volatile.

What excites me most about ICOs is how accessible it makes organization. To get a group of 10 people to work on a common goal and share the reward is surprisingly difficult. The overhead of the legal and accounting costs makes it a non-start for anything worth less than a multi-million dollar venture. But what about all the opportunities below that? Local shops, gardens, and service based businesses?

I'd like to see a set of standardized smart contracts, where if you adhere to the protocols of the contract, investors can enjoy the benefit of certain expectations. Such as, the cap table being accurate. The distribution of shares will be known, along with the voting power of all members. The flow of income and payout of dividends will also be transparent.

If complying with regulation is cheap and accessible more people will do it. I'd like the SEC to open a github account and create regulatory compliant smart contracts. Let's welcome everyone into the business class and encourage local investments in our communities. That's my vision for ICOs at least.

Well, if the company ACTUALLY produces what was promised, and gives the token owners what they are owed, then it wasn't a scam.

Which ICO was not a scam ?

Scam =/= terrible investment idea. Tezos and Filecoin, for example, are not scams. They are serious projects that are attempting to bring something useful to the market. That said, they raised wayyy too much money, and may end up being terrible investments that don't return any profit, but that applies to many startups as well.

PlexCoin offered guaranteed 1300% returns or your money back. That is a pure scam.

Just because something is a good idea doesn't mean that it wasn't conceived or promoted specifically to scam people out of their money. Not speaking to Filecoin or Tezos specifically, but if something is a really good idea, why not take VC money or bootstrap it?

Many reasons. Here's a couple I can think of off the top of my head:

1) VC money comes with strings, and founders don't like to have the sword of Damocles hanging over their heads. (Although I think those founders are misguided, as I think most companies benefit from oversight).

2) ICO money is cheaper and plentiful. If it's available, why not take it? This is especially problematic when you have multiple companies pursuing the same idea. Take using the blockchain to create a data storage market. Filecoin raised $200mm+. Imagine they instead raised $3mm from VCs, and another competitor with less qualms raised $200mm. They would now have to compete with someone wayyyy better capitalized than they are. In the tech world, one company often wins the market. Being second could kill your company.

Is Uber scamming middle east sovereign wealth funds because they are letting them invest on crazy terms, when they could just as easily start turning a profit or go public? I think a company has a duty to: (1) disclose things honestly, (2) warn people of the risks, and (3) consider the danger of raising too much public money on the success of their venture. Beyond that, if investors wants to dump cheap money on them, why is it a 'scam' to accept?

Totally agree. The liquidity that ICO's bring to founding teams is a huge plus. It's going to better incentivize smart people to work on big, interesting projects. And get paid well to do so.

Wouldn't it also incentivize talent-less frauds to work on big-sounding projects?

Given the huge problems with current ICOs (Outright scams, or simply terrible investments), it seems that being smart or talented are not the qualities ICO 'investors' are looking for. I think the zeitgeist is that they just want quick pump & dumps.

For now, you might be right. But parallels could be drawn to the first dot com boom, junior mining markets etc. So much of new innovation is funded by speculation and stories.

Even the current public market interest in the blockchain space, regulated as is is, is mostly driven by a good story and a hope for the future.

This is how things work, and given a longer time horizon, the market will sort it out.

> Scam =/= terrible investment idea.

Any ICO marketed as an investment is likely illegal in the United States. Not necessarily a prima facie scam, but in violation of the Securities and Exchange Act.

Yes, I agree that many ICOs are being illegally marketed. Not all, however.

1) Filecoin and other ICOs are using Cooley's SAFT instrument in order to comply with US securities laws, and as a result, have limited marketing to accredited investors.

2) Lots of ICOs are banning US investors.

> Securities and Exchange Act

These are two separate acts: the Securities Act of 1933 [1] and the Securities Exchange Act of 1934 [2]. (Pedantic, pardon me.)

[1] https://www.sec.gov/about/laws/sa33.pdf

[2] https://en.wikipedia.org/wiki/Securities_Exchange_Act_of_193...

Maybe I'm wrong here, but doesn't investing in normal startups require being an accredited investor?

I see ICO's as marketing investment opportunities to unaccredited investors. I thought unacreddited investors in the U.S. are legally allowed to invest in public stock, and approved securities (like bonds, precious metals, etc) and only a handful of other things.

The notion of accredited investors legal requirement to invest in tech startups is that tech startups are inherently very risky, and the average person shouldn't be allowed to put their life savings behind something so risky. By this logic, it strikes me as very odd that ICO's are legal for U.S. citizens to invest in, and my guess is it's because the SEC hasn't come around to regulating them yet.

Does that sound correct, or is there reason to believe the SEC (in the long-term) will be okay with unaccredited investors investing in ICO's of tech companies? Are there other things with a similar risk profile that unaccredited investors can invest in?

I like how you mention Tezos and filecoin not being scams.

> PlexCorps marketed and sold securities called PlexCoin on the internet to investors in the U.S. and elsewhere, claiming that investments in PlexCoin would yield a 1,354 percent profit in less than 29 days.

Is this claim the crux of the securities violation?

It's effectively putting knowingly false information in your prospectus. I think that it is the crux, but IANAL

Right, I get that, but it seems like that statement is the only reason the SEC is halting the ICO. Seems like an incredibly idiotic statement to be making when selling a security. Would the ICO have gone off fine if they hadn't made such a ridiculous statement? I guess it could be argued without such a statement they wouldn't have raised as much money, but my guess is that they could had just hedged the statement to comply with securities laws. Seems like an incredibly dumb oversight, and anyone who knows about securities would have been able to see how dumb and risky making a statement like that is.

If you're making your first steps to regulate an industry you start with the low hanging fruit.

I guess the take away is that if you're offering a security to the general public, don’t break the law and you won’t get shut down.

From their FAQ:

"Is it safe? The cryptocurrency is currently the safest currency. Unlike cash, you cannot lose it or have it robbed. No bank will be able to validate your transactions or to take fees on your transactions. It's your money and no one will be able to scrutinize your operations."

People bought this?

For those interested in a little light reading on the subject of Securities Law and Crypto Assets:

https://coincenter.org/entry/framework-for-securities-regula...

https://coincenter.org/entry/a-securities-law-framework-for-...

if the company's in quebec, how were they able to freeze their assets? did the company have exchange accounts in US? does the SEC have some sort of agreement with the canadians?

I would also like to know more about this. Could anyone with experience in the area please explain?

My understanding is Canada doesn't have a federal equivalent of the SEC, but there are provincial bodies for the same purpose. I assume SEC reached out to the quebec securities group and quebec was convinced enough to take action?

I don't know for sure. All I know is that the AMF (Autorité des Marchés Financiers, Quebec "equivalent" of the SEC) froze Dominic Lacroix assets on Jun 13 2017[0]. Yet, his employees were still getting paid and he launched Plexcoin even if a court order was forbidding him to do so.

Maybe the AMF had information about accounts in USA and tipped the SEC?

[0] https://lautorite.qc.ca/en/general-public/media-centre/news/...

EDIT:

More information: The court order preventing him to launch Plexcoin was issued on July 20[1]. He did not comply and was charged for court contempt in September. The court found him guilty on oct 17 2017[2].

[1] https://lautorite.qc.ca/en/general-public/media-centre/news/...

[2] French only - https://lautorite.qc.ca/grand-public/salle-de-presse/actuali...

Because they are US ;). How were they able to bring down btc-e, owned by foreign citizens, employing foreign citizens, registered in a foreign country? US are playing by their own rules, and so far they have made the world to just eat it.

The SEC has global reach, and most regulatory authorities follow their lead. If you touch Americans in any way, shape, or form, they will find a way to get you.

If it's priced in USD then the SEC can act. To my knowledge, clearing any type of security with dollars as a denomination requires SEC approval. Due to the status of the dollar as the global standard currency this gives the SEC considerable power.

If you trade GBP/USD and then USD/EUR then you have to abide by SEC regulations.

If you sell PLEX/USD then you have to abide.

So anyone offering PLEX/USD has to comply with the freeze.

And if they have any accounts in dollars that will be frozen.

I'd be fascinated to see a documentary that followed the launch of an ICO just to see what sort of headspace they're in.

Scam artists have been around since we developed intelligence. These ones are just a little more high-tech.

So what actions did the SEC actually take? It's an Ethereum token, right? So even if the SEC froze the creator's assets, they can't prevent others from still trading the token. They haven't completely closed the on-ramps for the token, then, since new "investors" can still purchase them in exchange for some other token. I guess they've just halted the creation of new tokens and the advertisement of the token by its creator?

So what happens to all the existing investors? Does the SEC (or another entity) buy back their tokens with the seized funds? Clearly, I haven't dealt with ICOs before, nor do I understand much of how the SEC operates.

It might be useful to change the title to

"SEC Emergency Action Halts an ICO Scam"

Just clarifying that the emergency action is halting a single scam ICO and not halting all ICOs.

For clarity, the original title (and the title of the linked article) was "SEC Emergency Action Halts ICO Scam"

I've updated the title to try to be a little clearer on that point. (It confused me as well when I first saw it)

Website redirects me to this url: https://cdn01.plexcoin.com/403.html

Sketchy to say the least.

"PlexCoin" also seems like a name likely to run into trademark issues with the makers of the media management/DVR software Plex (plex.tv).

That's not really how trademark works.

It is only similar/same industries where that applies.

The rule of thumb is consumer confusion. Is an average person going to mix up the 2?

In this case, the answer is likely No.

> Is an average person going to mix up the 2?

Isn't the standard "a moron in a hurry"?

Given the state of the market these days before clicking in to the article I actually assumed the Plex Media folks were getting in on ICO madness

I would think EVE Online would have a much stronger case. They already have a digital currency called PLEX.

All ICOs should be banned! When you see all these scams around, you start appreciating regulation, law, and order more! I am not sure why so many engineers today are into anarchy when it's entirely against the basis of computer science and engineering in general! I get the idea about the distributed systems for higher resilience, but going against the merits of states and governments is just childish!

Ah yes, how dare we poke and prod at the validity of current governmental systems and regulations. That feudal era was such great times, if we had only not gone against the merits of the government of the day./s

There is little doubt that many ICO's are 'scams', and some people will get hurt financially because of it.

The challenge with regulations is, it's easy to quantify the harm they try to stop, but it's harder understand the impact they have on limiting future creation / innovation etc.

Tokens / ICO's have created a whole new, far more accessible way to fund and invest in new technology. Making it far more equal, fast, open and liquid than the traditional process.

Regulation is coming, as it should. I just hope it's done with an eye for encouraging the right type action, rather than just trying to stop the wrong.

There's no perfect system, but what we have right now is better than anything from the past, and it's only getting better. Anyway, I think under-regulation is worse than over-regulation.

And it will get better BECAUSE people are trying crazy new things, like ICOs.

Sure, there are problems, as with all new things. But the problems will be fixed eventually, and the legal system with be better because of it.

People doing something weird, and different and new and probably illegal, is THE way that our legal system gets better, as we learn to deal with new things, that might be bad OR good. And decide whether these illegal things should stay illegal, or become legal.

Totally disagree. We have to encourage as many experiments as we reasonably can to continue to advance / solve some of the big problems we are currently facing.

Over regulation limits innovation. We should only look to regulate when there is obvious and catastrophic harm. We can regulate after the fact, once we better understand the emerging system and the impacts it has. If potential harm is big, then it makes sense to regulate first.

The cost of regulation is harder to see then the benefits, but there is a cost.

Not to mention, do you not believe individuals have agency in this world? Why should you decide what I do with my money (assuming it harms no one)?

> Why should you decide what I do with my money (assuming it harms no one)?

Who decides what harms others and what doesn't?

I agree with your statement of appreciating law and order, but I think there is also a general malaise surrounding who gets to benefit from all of the currently "legal" financial arrangements. There's a feeling that the little guy is left out--or at most, given the dregs after private equity deals, large mergers, and IPOs go down. ICOs--while risky and uncertain--also offer a way of taking action without waiting for governments to "approve."

I don't think the government has to approve all startups funded via StartEngine or Republic, which do crowdfunding along with many others.

In fact, Regulation A offerings do require approval from the SEC.

Banning ICOs would, quite literally, be impossible.

This is a great point. China's attempt is a great example. They can shut down exchanges, but Wechat channels pop up offering escrow type services, and boom, the market is back in business.

It's impossible to ban narcotics as well, but they are still persecuted.

And look how well that works. Another great example of bad outcomes from over regulation.

One is an order of magnitude tougher than the other. Meanwhile, you picked a perfect example to show how useless banning something like narcotics is; it has led to massive negative second-order effects like gang war and international strife.

>I am not sure why so many engineers today are into anarchy when it's entirely against the basis of computer science and engineering in general!

Huh? The history of computer science and engineering is rich with anarchy, individual projects, and unstructured contributions to the field. It might be one of its best examples.

Hierarchy and separation of concerns are major engineering strategies.

This is exactly how you kill innovation and it's exactly what should NOT be done. It should be regulated, exactly what happens right now.

This is going to happen a lot methinks.

So iiuc, the problem was that they promised a given profit in a given timeframe?

Okay so I will play the Devils advocate here. They have good intentions and basically shrug off bad publicity and continue with their project. Then SEC step in shutting them down and bankrupting them before even charges were filled or they had their chance to defend themselves. Now moving forward months/years later they lack of funds or bad publicity made it they are forced to go down. So yeah in such scenario public and SEC will always be correct it was a scam :) every single time - just cut off founders hands, throw a fine, maybe jail time. Im sure its hard to meet potential business partners, make presentations or sales, when you behind bars.

The guy's already facing contempt of court charges in Canada. This is more preventing people running with the money.

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