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Asset Freeze Continues for Public Company That Pivoted to Crypto

The U.S. Securities and Exchange Commission (SEC) is likely to win its case against three individuals associated with Longfin Corp, a company whose stock skyrocketed after a blockchain pivot, said a federal judge.

U.S. District Judge Denise Cote said on Tuesday that the regulatory agency has a good chance of proving that Andy Altahawi, Suresh Tammineedi and Dorababu Penumarthi illegally benefited from the pivot. Longfin’s price jumped by more than 2,000% last year after it announced the acquisition of a blockchain startup.

In the court order, she wrote:

“The SEC has shown that it is likely to prove at trial that these defendants participated in an unregistered, illegal public offering of the stock of Longfin Corp.”

As part of this decision, Cote granted a preliminary injunction to the SEC and also maintained a freeze on $27 million worth of assets owned by Altahawi, Tammineedi and Penumarthi that the Commission sought in April.

As previously reported by CoinDesk, the SEC alleges that Longfin issued more than two million unregistered restricted shares to Altahawi, and tens of thousands of restricted shares to Penumarthi and Tammineedi, from which the three individuals garnered the now frozen assets in question.

The company’s CEO, Venkata Meenavalli, was also initially named as a defendant in the case, but Cote unfroze the assets of both Meenavalli and Longfin on April 23 after the latter demonstrated that neither he nor the company profited from the allegedly illegal offering.

January comments by the SEC Chairman Jay Clayton foreshadowed the Longfin case. He remarked at the time that the Commission is scrutinizing “the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology” to ensure that they comply with securities laws.

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Japan's Finance Watchdog Eyeing ICO Regulation, Says Report

Japan’s financial regulator is mulling the creation of a regulatory framework for companies raising funds through initial coin offerings, a report indicates.

According to Sankei Shimbun, the Financial Service Agency is considering the revision of relevant laws and regulations in an effort to regulate ICOs in Japan, amid the growing popularity of token sale activities within the territory.

The report indicates that Japan currently has no clear regulations covering ICOs specifically, while the existing bitcoin payment law that went into effect last April is not sufficient to define the legal status of some ICO activities.

“There is an increasing demand for amendment of the law, and the FSA is planning to consider suspension of inappropriate ICOs,” the report reads.

The FSA has already started monitoring ICOs that target Japanese investors and are deemed suspicious by the agency.

As reported, the FSA has issued multiple warnings to a Macau-based cryptocurrency firm that solicits interests from residents in Japan and published a formal statement on its website to order a halt to the firm’s operation in the country.

The move towards a potential regulation is also a follow-up to the FSA’s statement in October last year, in which the agency stressed several risk factors of token sales activities with a fund-raising purpose.

Other nations have recently moved to more clearly define ICO tokens, both to protect investors and to bring clarity to the industry.

Just four days ago, Austria announced plans to draw up ICO and cryptocurrency regulations, using existing rules for the trading of gold and derivatives as a model.

And on Feb. 22, Germany’s financial markets regulator issued new guidance on how it will classify ICO tokens, including those it will consider securities.

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Dutch Regulator: ICO Environment Is a 'Dangerous Cocktail'

Regulators have issued a new warning to investors in the Netherlands about putting money into initial coin offerings (ICOs).

The Netherlands Authority for Financial Markets (AFM) – the country’s equivalent to the U.S. Securities and Exchange Commission – published a statement today outlining the risks it sees in the market for new cryptocurrencies, including those issued through the blockchain funding model.

Merel van Vroonhoven, chairman of the AFM, said in a statement:

“Although the AFM sees the possibilities of blockchain technology for financial services, it points to the high risks of ICOs in the current hype. The high risk of scams and loss of intake combined with the hype around ICOs at the moment is a dangerous cocktail.”

The regulator went on to enumerate a number of possible concerns for investors, including a lack of transparency into some ICO organizers. AFM also warned investors to be wary of promises of high returns, as well as the risk of price manipulation in token markets that have low levels of trade velocity.

In a follow-up statement to CoinDesk, a representative for the agency called for greater cooperation among regulators on the issue.

“At this moment we have sent out this warning as have other supervisors in Europe. As ICO’s are international phenomena’s and reach out to consumers/investors cross border, it is important we cooperate with the other European regulators,” the representative said.

The release is the latest from a national-level securities regulator, adding to the growing chorus of concern from agencies in countries like Canada, Singapore and the U.S. In some cases, as seen in China and South Korea, market watchdogs there have moved to prohibit use of the funding model entirely.

The European Securities and Markets Authority, one of the primary markets regulators for the European Union, issued similar warnings today. The AFM does not have the ability to regulate ICOs, according to Dutch News.

Approximately $3.3 billion has been raised through the ICO model to date, according to the CoinDesk ICO Tracker.

Editor’s Note: Some of the statements in this report have been translated from Dutch.

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The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.