The U.S. Securities and Exchange Commission (SEC) has refused to honor attorney at law David Silvers Freedom of Information Act (FOIA) request to provide information regarding Tezos, a blockchain project. That has been reported on by Reuters, who broke the story on February 10, 2018.
“A top U.S. securities regulator says it cannot release documents related to the cryptocurrency project Tezos because doing so could interfere with an investigation or enforcement activities, according to a document seen by Reuters on Friday.”
David Silver as Attorney for Plaintiffs in Lawsuits Filed Against Tezos
Attorney David Silver is the representative of plaintiffs who had filed a lawsuit against Tezos in November 2017. This is the second lawsuit of its kind. Tezos was able to collect $232 million through an ICO in July 2017, breaking all records but also attracting a lot of attention to itself.
“The closure of Tezos’ $232 mln ICO – the largest in history – is dividing the community concerned about mass Ethereum sell-offs.”
Silver had filed an official FOIA request, but the SEC did not agree to disclose the requested information on Tezos. They said that it came under Exemption 7(A), which is used if releasing information could cause damage to any ongoing enforcement activities. However, the letter did not in any way suggest that the SEC is currently investigating Tezos at all.
“This exemption protects from disclosure records compiled for law enforcement purposes, the release of which could reasonably be expected to interfere with enforcement activities. Since Exemption 7(A) protects the records from disclosure, we have not determined if other exemptions apply. Therefore, we reserve the right to assert other exemptions when Exemption 7(A) no longer applies.”
Tezos ICO in Second Position in List of Highest Funds Raised
Currently, the Tezos ICO holds second position in the list of highest funds raised by an ICO ever. It has already faced numerous lawsuits and is regularly under scrutiny, with people doubting that it complies with relevant SEC regulations. In the various lawsuits, plaintiffs claim that the ICO sold US investors securities, for which SEC registration and approval are required.
“Under the federal securities laws, every offer and sale of securities, even if to just one person, must either be registered with the SEC or conducted under an exemption from registration.”
SEC Claims ICOs Regularly Violate Laws
There have been numerous hearings and other forms of legal actions in relation to ICOs as of late, which is a clear sign that governments the world over are trying to get to grips with the concept of decentralized financial institutions. On February 6, 2018, for instance, there was a joint SEC and CFTC hearing, where SEC Chairman Jay Clayton made it clear that current ICOs are regularly in violation of a range of different laws. The SEC does intend to further investigate such violations, which could lead to the closure of other ICOs.
Tezos, meanwhile, is listed as a crowdfunding business as well as a blockchain.
“Tezos is a new decentralized blockchain that governs itself by establishing a true digital commonwealth. It facilitates formal verification, a technique which mathematically proves the correctness of the code governing transactions and boosts the security of the most sensitive or financially weighted smart contracts.”
Implications of SEC’s Refusal to Disclose Information
The insecurity and uncertainty about the refusal of the SEC to respond to the FOIA could have significant ramifications. Naturally, many people are speculating that it is indicative of the SEC wanting to take investigative actions against Tezos. Others take a more sobering approach and believe the SEC is genuine in its reasons for denying the request, but that their issue is perhaps not with Tezos ICO, but rather with a different ICO altogether. What is clear is that federal regulators are struggling to understand these new concepts.