Pantera Capital, a crypto hedge fund, has disclosed that up to one-quarter of the ICO projects it funded may be found guilty of US securities laws violation once the SEC comes to a decision.
As it stands, U.S. companies in the blockchain industry which didn’t get SEC approval before beginning operations now suffer the consequences. Pantera Capital, one of the largest hedge funds for cryptocurrency, revealed to Bloomberg that up to 25% of the crypto projects in its control might need to return its funding.
Though Pantera Capital is confident that the SEC decision will not influence most of its investments, at least 25% of them have their fate hanging on a balance right now. It is possible that securities laws violation is the crime of these projects.
What Is the SEC’s Position?
On 16th of November, the US Securities and Exchange Commission (SEC) released an announcement stating that AirFox and Paragon Coin, two startup companies, had realized funds worth millions of dollars by distributing tokens which the US securities laws didn’t approve because they were distributed to unlicensed investors.
For any startup facing similar challenges, in a bid to satisfy the law, it seems that the right thing to do is to simply pay the fine, present a refund and then get the SEC approval by registering with the Commission. As easy as this sounds, some startups may not be able to do it because the funds they raised have been channeled into products design and team building, with the majority of the funds spent.
After the events of the previous month, where the two ICOs were used to set an example, the message resonated across the entire crypto community. It suddenly became obvious that no ICO startup is exempted. If they issued tokens to unlicensed investors and failed to get the SEC registration, they certainly will be the next in line to experience the wrath of the SEC.
STOs Are Becoming Increasingly Attractive
This has resulted in companies changing course towards SEC approved STOs which may be very costly for startups, while ICOs are almost dying off in the United States.
Dan Morehead and Joey Krug, co-chief investment officers at Pantera, through a newsletter stated on Thursday:
“While we believe the vast majority of the projects in our portfolio should not be affected, approximately 25 percent of our fund’s capital is invested in projects with liquid tokens that sold to U.S. investors without using regulation D or regulation S.”
They further said:
“If any of these projects are deemed to be securities, the SEC’s position could adversely affect them. Of these projects, about a third (approximately 10 percent of the portfolio) are live and functional and, while they could technically continue without further development, ending development would hinder their progress.”