According to a blog post from a blockchain-based organization called Protostarr, the company had a recent phone call with the U.S. Securities and Exchange Commission (SEC) and had to shut its token sale operations down. Further, the startup plans to refund its investors by sending the ethereum funds raised back to the original addresses.
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SEC Rattles an Ethereum-Based ICO Startup
Over the past few weeks, the topic of Initial Coin Offerings (ICO) and the latest SEC announcement has been a hot conversation. After raising billions this year, some people thought that the ICO environment was getting a bit out of hand, and the U.S. regulator seems to agree. Now a new token crowdfund, created by a startup called Protostarr has to cease operations because of a recent phone call with the regulatory agency. Protostarr raised roughly $45,000 worth of ether to build an earnings distribution D-App (Decentralized Application) during its ICO that started two weeks ago.
“On August 24, 2017, we were contacted by the United States Security and Exchange Commission regarding the initial coin offering of Protostarr tokens to fund the development of our Ethereum decentralized application,” explains the startup’s recent announcement.
After consultation with multiple lawyers, we have decided to cease further operations and refund Ethereum collected in our crowdsale that began on August 13, 2017.
Protostarr’s website now details the startup is shutting down.
Protostarr Team Plans to Refund Investors and Move On to Other Projects
According to a recent interview with Forbes columnist Laura Shin, Protostarr’s founder Joshua Gilson said, “[SEC investigators] called and asked for me to volunteer a bunch of information about the company.” Gilson believed the questioning made him feel like he needed to contact the team’s lawyers. Then the Protostarr founder says he chatted with lawyers familiar with the exchange commission’s regulatory processes, but no one could give him a solid answer. So the team decided to refund their investor’s ether and move on to different projects.
SEC’s New Director of Investment Management and the ‘ICO Gray Area’
Currently, many other ICO’s are finding themselves in the regulatory ‘gray area,’ where they don’t know if SEC considers their token projects securities. The U.S. regulator hasn’t enforced anything so far, but it seems now they have ramped up their regulatory efforts.
Cryptocurrency enthusiasts were surprised to hear that the regulatory agency just hired Dalia Blass as Director of the Division of Investment Management. Blass worked for a law firm that advised the Winklevoss Twins, so people think she may turn out to be a ‘crypto-proponent’ and possibly push the highly anticipated bitcoin ETF through. However, this is no reason to think SEC will let the ETF slide or take it easy on ICOs.
Protostarr will be the first ICO to shut down shop due to the U.S. regulator’s concerns with these types of investment vehicles.
What do you think about the Protostarr ICO having to return funds to their investors? Let us know in the comments below.
Images via Pixabay, Twitter, and Protostarr.io.
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