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SEC Investor Alert – Initial Exchange Offerings (IEO) may be illegal securities offerings

The U.S. Securities and Exchange Commission (SEC) issued an investor alert regarding the so-called Initial Exchange Offerings (IEO). In these IEOs, crypto-exchange platforms offer issuers the listing and placement of their tokens. The SEC points out that most of these exchange platforms operate without authorization. From the SEC’s point of view, IEOs are a further development of the Initial Coin Offerings (ICO), which were also mostly sold without registration and approval by the regulators.

There are important issues investors should be aware of before investing in an IEO.  As in the case of ICOs, depending on the facts and circumstances of the offering, the offering may involve the offer and sale of securities.  This means the IEO may be subject to registration requirements that apply to offerings under the federal securities laws. 

SEC Investor Alert (published Jan 14, 2020)

In the SEC’s opinion, most cryptographic tokens issued by ICOs qualified as securities and should, therefore, have been registered. The sale without registration and approval is a violation of securities laws and is therefore illegal. The SEC assumes that most IEOs are also illegal securities issues and warns investors.

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