The Financial Industry Regulatory Authority (FINRA) has a word of warning for investors. It has raised the alert for initial coin offerings (ICO) that promote an adoption of Simple Agreement for Future Tokens (SAFT) in an effort to try and convince investors that they are offering a security or are in compliance with regulatory guidelines.
The agency issued the warning last week in its Investor’s Alert publication. It points out that a SAFT is not an indication that the investment vehicle has received approval by regulators, adding that it is little more than a private opinion that may or may not be supported by regulators.
Part of the publication reads, “Know that investing in a SAFT contract does not mean the offering is “safe” or compliant with applicable federal and state laws…No matter what a company says about the ability of a token to change characteristics from a security to a non-security, there is no guarantee that the SEC or the courts would agree with a company’s assessment. A determination of whether something is a security is a facts and circumstances analysis, and titles don’t change that.”
A SAFT is a type of investment contract that is offered by a crypto-based company to accredited investors. It promises a certain number of tokens in exchange for an investment, on the condition that the tokens will be delivered once the business is up and running, as opposed to an ICO, which promises delivery of the tokens immediately.
SAFT contracts are defined as securities and have to comply with certain securities regulations. According to SAFT guidelines the contracts are delivered to investors as securities during an ICO with the assurance that the tokens will be delivered at a specific time following the launch of the endeavor. When they are physically issued, however, they can be deemed utility tokens, which are not required to comply with existing security regulations.
FINRA’s warning follows enhanced scrutiny of ICOS by several financial authorities, including the Securities and Exchange Commission (SEC). This past March, the SEC began an investigation into a number of companies that were offerings ICOs, concerned that the entities were not incompliance with existing laws. 80 startups were subpoenaed and several have already faced the gavel. Due to the increased attention on ICOs, many companies have adopted internal policies to protect their endeavors, including a ban on ICO investments on the part of US investors.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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