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SEC Will Go Against Companies Using ‘Blockchain’ on Their Names to Boost Prices

The United States Securities and Exchange Commission (SEC) is taking the hype of blockchain technologies more seriously by standing against companies using misleading names to promote an artificial increase of their stocks value.

This initiative is the result of several irregular situations in which companies with no type of link to blockchain technologies carried out a rebrand to place their new shares in the stock market. The overall reaction was one of a disproportionate increase in prices without any substantial change to support such behavior.

This practice could be considered as fraudulent because -even if not explicitly- the use of ‘Blockchain’ in the name generates a specific image or a natural expectation. A corporate renbranding could imply a hidden intention on the part of the management to produce this type of reaction.

After a series of investigations by the Microcap Fraud Task Force and the Financial Industry Regulatory Authority (FINRA), the first actions were decisive.

The investigation was based primarily on investor fraud by UBI Blockchain Internet, LTD, a company that, despite having the word ‘blockchain’ on its name, is engaged in the sale of maternity clothing, cosmetics, children’s clothing and household goods.

In an official press release, as a result of the investigation, the SEC determined that they used the word ‘blockchain’ as a strategy to commit fraud through an illegal sale of shares at unauthorized prices:

The SEC’s complaint alleges that Jesky, and DeStefano, both residents of Nevada, received 72,000 restricted shares of UBI Blockchain stock in October 2017 and were permitted to sell the shares at a fixed price of $3.70 per share under the registration statement. Instead, the complaint alleges that Jesky and DeStefano unlawfully sold the shares at much higher market prices – ranging from $21.12 to $48.40 – when UBI Blockchain’s stock experienced an unusual price spike.”

The SEC had previously ordered the suspension of UBI Blockchain securities trading due to the misleading information under which they operated

The Commission temporarily suspended trading in the securities of UBIA because of (i) questions regarding the accuracy of assertions, since at least September 2017, by UBIA in filings with the Commission regarding the company’s business operations; and (ii) concerns about recent, unusual and unexplained market activity in the company’s Class A common stock since at least November 2017

The “Bubble” Debate

This practice is one of the arguments put forward by bearish analysts and skeptics who believe that cryptos and blockchain technologies are in a bubble. The “bubble” is a phenomenon in which the prices of something are artificially inflated without any support, eventually falling to their real value (a bubble pop).

Long Island Iced Tea

The most recent common case cited by experts is from a company called New York’s Long Island Iced Tea. After changing its name to Long Blockchain Corp., its shares increased by up to 200%. On May 25, 2018, The Nasdaq Stock Market Exchange decided to delist the company

Another clear example of this practice is On-line Plc, a company that after changing its name to On-line Blockchain Plc managed to increase its shares by up to 394% in a 24-hour period.

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EOS Team Propose to Rewrite its Whole Constitution

EOS, one of today’s most promising blockchains, is going through a rather complicated process after its mainnet launch announcement.

The long-awaited bullish run has not happened, and a series of problems and disagreements have tarnished the birth process of this blockchain, casting doubt on its functionality, at least in the short term.

EOS logo

One of the most recent events that caused some annoyance among users was the order to freeze 7 EOS addresses. Similarly, other articles criticized the extreme level of centralization of the network.

However, there is little that the development team can unilaterally do, as the group behind EOS, Block.one, delivered the code to the community to give the network a higher level of transparency.

Despite this situation, on Thursday, the EOS team revealed on its official Telegram channel the proposal for a new Whitepaper “EOS.IO Technical White Paper v2“.

EOS Arbitration: Not The Best Implementation Right Now

The EOS team proposes to change the Whitepaper starting from the basics. One of the controversial aspects seeks to reduce the power of arbitrators over the decisions affecting the network:

“Bottom line … damage to community from ECAF is greater than funds we hope to restore to users … Arbitration should be limited to correction of intent of code… Freezing should be limited to code not function at intent.”

Dan Larimer

Such statements are a reference to the freezing of the addresses following a dispute over the theft of private keys.

A Blockchain’s Gotta Do What a Blochckchain’s Gotta Do

Shortly afterward, Dan Larimer, CTO of Block.one, published an article in which he talks about the importance of code as “law” in a blockchain, and how that should be the focal point for arbitrators.

He also mentioned that it was essential to consider the possibility of eliminating excessive arbitration to achieve greater objectivity in the blockchain and combat the possibility of mob-rule proliferation :

“Users of the EOS blockchain need some guarantees from the community in order to feel safe and secure. If everything on the blockchain is subject to mob-rule, then no one is safe. If the community does not have strong, objective, organizing principles, then everything is subject to interpretation and becomes unpredictable and arbitrary

Block One calls for an end to all arbitration orders other than to render non-binding opinions on the intent of the code.”

This post concluded with a proposal for a Constitutional Referendum with some very interesting suggestions, among them preventing block producers from freezing accounts.

Evidently, such proposals raised some questions around users. Some of which could not yet believe Larimer’s intentions to rewrite the whole constitution:

“Am I correct, in understanding you’re proposing removal of the entire current constitution, and replacing it with one that only refers to arbs being able to rule on code VS intent and code vulnerabilities / hacks like DAO?” a Telegram user asked

To which Larimer responded: “yes.”

The EOS community has not yet taken a clear direction on this proposal; however, the results of a possible adoption could be positive, at least at first sight.

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