American CryptoFed: SEC Halts Registration of Two Stable Tokens | Practical Law

American CryptoFed: SEC Halts Registration of Two Stable Tokens | Practical Law

The SEC announced administrative proceedings against American CryptoFed DAO LLC, preventing the company's registration of two stable tokens due to deficiencies and misleading information included in its Form 10 registration statement for the tokens.

American CryptoFed: SEC Halts Registration of Two Stable Tokens

Practical Law Legal Update w-033-5828 (Approx. 4 pages)

American CryptoFed: SEC Halts Registration of Two Stable Tokens

by Practical Law Finance
Published on 01 Dec 2021 • USA (National/Federal)
The SEC announced administrative proceedings against American CryptoFed DAO LLC, preventing the company's registration of two stable tokens due to deficiencies and misleading information included in its Form 10 registration statement for the tokens.
On November 10, 2021, the SEC announced administrative proceedings against issuer American CryptoFed DAO LLC (American CryptoFed), preventing the company's registration of two stable tokens, the Ducat token and the Locke token, due to deficiencies and misleading information included in the Form 10 registration statement for the tokens. Form 10 is the SEC's general form for registering securities.
According to the SEC, the Form 10 contained materially misleading information, which:
  • Claimed the tokens were not securities, despite the cover page identifying them as securities to be registered under Section 12(g) of the Exchange Act and its use of Form 10 to register the tokens.
  • Asserted the intent to use Form S-8, a Securities Act of 1933 (Securities Act) form, to distribute tokens to non-employee individual contributors, even though that is an illegal use of the form.
The American CryptoFed Form 10 also failed to include the following:
  • Financial information required under Items 303 and 305 of Regulation S-K.
  • Audited financial statements required under Rule 3 or Rule 8 of Regulation S-X.
  • A beneficial ownership table required under Item 403 of Regulation S-K.
  • An executive compensation table required under Item 402 of Regulation S-K.
  • Exhibits complying with Item 601 of Regulation S-K.
  • A clear and complete description of the general development of American CryptoFed's business or terms, rights, and obligations of the registered securities required under Items 101 and 102 of Regulation S-K.
A final order will be issued by the SEC after:
  • The completion of a public hearing;
  • The completion of a motion for ruling on the pleadings or summary disposition determining a public hearing is not necessary; or
  • The determination that a party is in default and no public hearing is necessary.
  • The administrative proceedings will determine whether to deny or suspend the registration of the company's tokens in order to protect investors.