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Crypto Projects Going Bankrupt Soon?

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Crypto Projects Going Bankrupt Soon?

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Last year, anything that has the term blockchain, crypto, and other related terms enjoyed the interest of profit-driven investors. And because of this, We’ve seen the rise of ICOs. ICOs can be considered as a faster alternative for companies that are trying to raise funds. They’d sell tokens that can be used for different functions. Unfortunately, many of these ICOs were considered a scam. And also, few really had a practical use. Now, many of these ICOs are struggling and many investors lost their money in the process.

2018 is the story of regulatory changes. Countries took notice especially after Bitcoin spiked from just around $1,000 to almost $20K. With the number of people getting excited about the cryptocurrency, not to mention the potential use of cryptos on illicit activities, regulators have no other option but to take action.

Recently, the SEC has been acting on ICOs. This is the reason why crypto exchanges are also careful which tokens then include in their platform since they could easily be targeted by the SEC as well. The latest ICOs that have been scrutinized by the agency are Paragon and Airfox. Both were made to pay $250,000 each. And because of this, it is believed that there will be crypto projects that are going to declare bankruptcy.

Aside from paying the fine, both companies also agreed to return the money to its investors and more. According to the official press release of the SEC, “Both companies have agreed to return funds to harmed investors, register tokens as securities, file periodic reports with the Commission, and pay penalties”.

The Right of Investors to Sue

Now, there’s a bigger issue that could cause other crypto projects to hit the ground. According to the document, it simply reaffirmed that investors in ICOs can choose to file charges citing the existing guidelines by the SEC. For example, if you have an investor who lost a significant amount from his or her investment could easily file a lawsuit and could get his or her money back.

SEC’s Enforcement Co-Director Stephanie Avakian mentioned that “We have made it clear that companies that issue securities through ICOs are required to comply with existing statutes and rules governing registration of securities. These cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets”.

What Happens to Crypto Price?

It seems that there are two options for ICOs what to do next. They can either just block out the investors from the US when it comes to participating in the fundraising. Or, they can just register the tokens as registered securities.

Now, with the recent crackdown, it is a good question to ask what could happen next to the price of different cryptocurrencies. Is the crypto market expected to sink lower? Recently, Bitcoin’s price has already dropped to its lowest this year mainly because of Bitcoin Cash’s hard fork.

But in the long run, it seems that this can be a good move by the agency. Keep in mind that even Ripple has faced lawsuits claiming that XPR is actually a security.

John Jayme

John is a crypto investor, enthusiast and copywriter. He is in charge of daily news and other emerging trends in blockchain technology.

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