The SEC has halted the token registration process for the US DAO CryptoFED, which gained legal status in Wyoming earlier this year but has now apparently added “misleading” information to the file. So let’s read more today in our crypto news.
American CryptoFED became the first legally recognized DAO in the US this year, but ran into trouble with regulators. The US SEC has banned token registrations in the country from registering their crypto tokens as securities, claiming that they are giving “misinformation” to prospective investors. American CryptoFed DAO LLC has filed Form 10 with the SEC to register securities that are traded on multiple US exchanges. However, according to the SEC, the form did not contain enough information about the Locke and Ducat tokens that the company was planning to issue. Required information about the American CryptoFed was missing in the form, as the SEC announced in a statement.
Shot: Hunter: pic.twitter.com/mDgwwkGeWr
– Preston Byrne (@prestonjbyrne) November 10, 2021
American CryptoFed became the first decentralized autonomous organization in the United States in July and received legal status upon registration in Wyoming. The company runs on the EOS blockchain and plans to introduce a new currency system in the US. In the crypto world, a decentralized autonomous organization is one that gives token holders control rather than relying on a paid hierarchy like a normal company. DAOs tend to use the ETH blockchain to operate, but some have popped up on other smart contract-enabled networks.
Back in March, Wyoming passed a new law recognizing DAOs as a limited company, and it was the first state to do so to further bolster its reputation as a crypto-friendly state. Wyoming welcomed crypto companies to the state in 2019 when it passed numerous crypto-friendly bills aimed at attracting fintech innovators and even being the first state in the US to ban the crypto banking charter, especially since Cynthia Lummis Bitcoin highly praised.
This was the first DAO LLC in Wyoming, American CryptoFed, but had problems and most were unable to issue tokens. The SEC made it clear:
“The SEC regulation sets out administrative procedures to determine whether it is necessary and appropriate to protect investors by denying or suspending the registration date of the ‘Ducat’ and ‘Locke’ tokens. The American CryptoFed enters into force.”
Kristina Littman, director of the network unit of the SEC’s Enforcement Division, noted:
“We claim that the American CryptoFed has made seriously misleading statements and has not provided the information required by law in its registration form.”
Wyoming DAO law has been heavily criticized, and Preston Byrne, a partner at Anderson Kill Law, says the law is used by scammers to sell shitcoins and “half-way tokens”. The judge will decide to deny or suspend registration of American CryptoFed tokens, which will require further investigation.