According to Pantera Capital Management, about 25 percent of the ICO funded blockchain and digital currency projects are supposedly in violation of U.S. securities laws and may have to refund money to their contributors.
The Menlo Park, California-based hedge fund believes the projects may be at risk after the U.S. Securities and Exchange Commission’s announcements at November 16, regarding two startups that did not comply with securities law and issued tokens to non-accredited investors for fundraising. Paragon Coin, is one of the projects which has announced it may have pay back investors.
It has come to notice that many startups did not register with the SEC, especially those that conducted initial coin offerings last year. They also sold tokens to regular people rather than to well-versed accredited investors. As a result of such unethical practices in the crypto market, the organizations have begun imposing strenuous regulations, and thus the process of token issuance has undergone extreme changes.
In a newsletter, Pantera’s co-chief investment officers, Dan Morehead and Joey Krug wrote,
“While we believe the vast majority of the projects in our portfolio should not be affected, approximately 25 percent of our fund’s capital is invested in projects with liquid tokens that sold to U.S. investors without using regulation D or regulation S. If any of these projects are deemed to be securities, the SEC’s position could adversely affect them. Of those projects, about a third are live and functional and, while they could technically continue without further development, ending development would hinder their progress.”