SEC Halts Munchee ICO for Securities Violations

Munchee Inc. has refunded tokens sold in a $15 million ICO following an investigation by the U.S. Securities and Exchange Commission (SEC)
12 December 2017   1004

The SEC announced yesterday that Munchee Inc. had provided refunds to investors after officials made contact and drew issue with its token sale, which the agency said constituted the offer and sale of unregistered securities.

Munchee Platform is a decentralized blockchain food review social platform. In October and November, Munchee carried out the offering of MUN tokens to raise about $15 million.

Munchee ICO2Munchee Platform

According to the report, the SEC argued that the MUN tokens constitute securities because they were investment contracts. The document also notes that the tokens were ultimately deemed a security regardless of their utility when the sale took place.

Even if MUN tokens had a practical use at the time of the offering, it would not preclude the token from being a security. Determining whether a transaction involves a security does not turn on labelling – such as characterizing an ICO as involving a "utility token" – but instead requires an assessment of "the economic realities underlying a transaction".


The SEC order

It is stated that agency first contacted Munchee on the second day of the sale and after that the company did not deliver any tokens to purchasers. The SEC decided not to impose a penalty due to the fact that ICO immediately returned the proceeds and cooperated with the investigation.

Recently, we have reported that the SEC shuts down PlexCorp ICO and files charges against the founder.

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CFTC to Issue ICO Investor Advisory

Before buying coins, you need to thoroughly study their nature and understand what factors can affect their price, CFTC advises 
17 July 2018   83

The US Commodity Futures Trading Commission (CFTC) published a document with recommendations for potential investors in ICO projects and token buyers. This is reported by Coindesk.

The agency's document says that before buying coins, you need to thoroughly study their nature and understand what factors can affect their price.

Also, a potential buyer should remember that, depending on the structuring, some tokens can be derivatives, commodities or securities.

Buying digital coins or tokens only because you expect to sell them at a higher price later is the definition of speculation and carries considerable risk, regardless of how good a white paper, application or business plan sounds. Unfortunately, fraud is another significant risk to consider. Your best protection is to thoroughly research digital coins or tokens and exercise caution. 

CFTC ICO Advisory

The guide also states that before investing in the ICO, it is necessary to find information about the organizers of the project, and also to find out whether they themselves participate in their  ICO.

Representatives of the agency also refer to the study, according to which more than 50% of ICO start-ups ceased to exist during the first four months after the end of the token.