Several companies have asked us about the status of registrations and qualifications of security token offerings (STOs) / initial coin offerings (ICOs) with the Securities and Exchange Commission. There is not much to report.
SEC “Bedbug” Letter
On June 15, 2018, the SEC published its first “bedbug” letter to address a proposed token offering by Monster Products, Inc. The letter indicated that the SEC would not review Monster’s Form S-1 registration statement due to the significant deficiencies contained in the S-1.
Monster originally filed its Form S-1 on May 25, 2018 related to an offering of up to 300 million Monster Money Tokens which could be utilized by customers to purchase Monster products and services on Ethereum blockchain technology. The Form S-1 provided that the Tokens would be priced at $1.00 per Token and would have given holders of the Tokens the right to convert into Monster common stock in the event the Tokens were not trading on a cryptocurrency or U.S. stock exchange by mid-2020.
In response to Monster’s Form S-1, the SEC filed its “bedbug” letter, which is a staff letter that addresses those registration statements on which the SEC refuses to provide comments due to significant deficiencies. The letter provides the SEC’s rationale for not reviewing Monster’s Form S-1. Although the letter is brief and does not provide much detail regarding the SEC’s refusal to provide comments to Monster’s registration statement, the letter does state that the Form S-1 failed to comply with applicable federal securities regulations.
Current Status of Form S-1 and Form 1-A Offerings
As of the date of this blog, there has only been one Form S-1 registration statement filed with the SEC that involved the offering of tokens. This $75 million Initial Coin Offering (“ICO”) was conducted by The Praetorian Group.
The Form S-1 registration statement can be found here.
Regarding Form 1-A offerings, there have been three offering statements filed with the SEC to date involving the offering of tokens. The first entailed a $10 million offering by Gab AI Inc. (“Gab”), the second offering of $50 million was conducted by Prometheum, Inc. (“Prometheum”) and the third involved an offering of $50 million by Knowbella Helix Inc. (“Knowbella”).
KMK Legal Alerts and Blog Posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.
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Chris Brinkman practices in the firm's Business Representation & Transactions Group with a concentration in venture capital/private equity, start-ups & growth companies, securities, and mergers and acquisitions. Chris ...
Brett Niehauser practices in the firm's Business Representation & Transactions Group.
Brett earned his law degree from the University of Cincinnati College of Law in 2017. While in law school, Brett worked in the University of ...
Mark Reuter advocates for business clients in transactions, proceedings and conflicts regulated by federal and state securities laws and stock exchange rules. A partner in the firm’s Business Representation & Transaction ...
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