When the crypto market took a nosedive in 2018, ICO founders were hit with waves of investor lawsuits. Now that the market has stabilized, we may see another wave: companies and investors who may need to return billions in funds paid by FTX.
The ruling came from a Manhattan Federal court, where Judge Laura Taylor Swain ruled that the creators of an unlicensed security token could not get away with calling it an “utility” token.
FTX Investors Might Have To Return Funds Worth Billions
The ruling is a significant development in the ongoing debate about the legal status of cryptocurrencies. If it stands, it could have a major impact on the future of ICOs and blockchain technology.
The ruling may also have implications for companies that are currently engaged in ICOs or planning to conduct them in the future. Those companies should consider whether they need to return any funds they received from investors who bought unlicensed securities through their tokens, regardless of whether those tokens were purchased prior to this ruling or after it was issued by Judge Raymond Dearie.
Regulators in the U.S. have been cracking down on unlicensed ICOs for years. But now, a recent ruling by the Manhattan Federal Court could open the floodgates for companies and investors to return billions of dollars worth of funds from unlicensed sales of tokens from 2017.
The SEC has been fighting against these illegal sales since as early as 2014 when it charged an individual with selling unregistered securities through an ICO on Craigslist; since then, we’ve seen more than 100 enforcement actions taken against promoters and issuers who conducted ICOs without registering them with regulators first.
