Initial Coin Offerings, or “ICOs” are growing in frequency and popularity, and that has SEC Chairman Jay Clayton worried. So worried that, in the last two months, the Chairman has issued repeated and direct warnings to attorneys assisting businesses with ICOs. He has asserted that these attorneys may be violating their professional obligations and assisting others to commit securities law violations.

ICOs are quickly emerging as a hot new means of raising capital. ICOs generally rely on the same “distributed ledger” technology as Bitcoin and other cryptocurrencies. Instead of issuing digital units to be used as a means of exchange as with cryptocurrencies, ICOs issue digital coins or tokens as a means of raising private capital for investment or operational expenses. This distinction may be subject to future challenge, but the SEC has left no doubt that it is focused on ICOs used to raise capital, and particularly on the lawyers who provide advice on securities law issues attendant to these offerings.

Rising Tide of Warnings