The SEC issued a warning on Tuesday warning investors about the risks associated with Initial Coin Offerings (IEOs).
According to the announcement, the US regulatory authority views IEOs in a similar way to Initial Coin Offerings (ICOs), many of which the authority has investigated as unregistered securities offerings in recent years. While IEO providers may claim that their sales differ from ICOs, they may still violate federal securities laws, the SEC said. As such, the agency advised potential investors to “be careful” when investing in an IEO.
“IEOs are touted as an innovation of ICOs because they are offered directly by online trading platforms on behalf of companies – usually for a fee – to provide immediate trading opportunities for digital assets,” the Tuesday announcement said.
However, the SEC targeted crypto exchanges directly, noting that they “typically are not registered with the SEC” and “may improperly refer to themselves as ‘exchanges'”. The SEC also warned that a platform that says it is registered does not necessarily mean that it is actually registered with the authority, and stressed that “there is no such thing as an IEO approved by the SEC”.