SEC Halts Wyoming DAO from Registering Digital Tokens as Securities
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SEC Halts Digital Token Registration for American Cryptofed DAO
In September, the American Cryptofed DAO filed with the U.S. Securities and Exchange Commission (SEC) to register the tokens, known as "Ducat" and "Locke," as equity securities on U.S.-based exchanges.
The filing described Ducat as an “inflation and deflation protected” stablecoin to be used for daily transactions and a store of value. While Locke was described as a governance token intended to stabilize the price of Ducat and provide Locke token holders the opportunity to participate in the CryptoFed DAO Constitution.
The disclosure further revealed that Ducat holders will receive interest payments of 3% to 5% annually, while consumers and merchants will receive rewards for every purchase transaction made in Ducat. In the meantime, interest and rewards will be paid in the form of Ducat tokens.
However, the regulatory agency claimed that the DAO did not provide sufficient information on both the tokens and the company, and contained materially misleading statements. Required information about the company's business, such as audited financial statements, beneficial ownership, and MD&A disclosure among other omissions was also missing from the form, the SEC said.
Kristina Littman, the SEC enforcement division’s cyber unit’s chief, said:
“We allege American CryptoFed made materially misleading statements and failed to provide legally required information in its registration form.”
Administrative Proceedings Will Determine Fate
Administrative proceedings will now take place to determine whether to deny or suspend the tokens’ registration.
In March, Wyoming passed a bill that recognizes DAOs as limited liability companies. Three months later, the American CryptoFed in July became the first decentralized autonomous organization in the U.S. to be granted legal status after being registered in the crypto-friendly Wyoming state.