American CryptoFed registration at risk as SEC alleges filing anomalies

Disclaimer: The article has been updated based on the official response from the American CryptoFed DAO. COO Xiaomeng Zhou explained why the SEC is not legally allowed to issue a stop order.

American CryptoFed DAO, first decentralized autonomous organization (DAO) To obtain legal recognition in the United States, there is a risk of losing its registration after the United States Securities and Exchange Commission (SEC) discovered an anomaly in the registration statement Form S-1 dated September 17, 2021.

The Wyoming Secretary of State’s office recognizes American CryptoFed as a legal entity in July 2021at the time the organization’s CEO, Marian Orr, believed that “Wyoming is the top blockchain jurisdiction in the world.”

However, on November 18, 2022, the SEC initiated administrative proceedings against the DAO to determine whether to issue a stop order. The stop order from the SEC will pull the registration of American CryptoFed and the sale of in-house token bars, Ducat and Locke.

According to to the SEC’s Division of Enforcement, the Form S-1 registration statement filed by American CryptoFed lacks vital information such as audited financial statements and details of the business and its management. The SEC further believes that the American CryptoFed filing contains “misleading statements and omissions” while being inconsistent in describing tokens as securities.

In this regard, David Hirsch, head of the crypto asset division of the enforcement and cyber unit, stated that:

“American CryptoFed not only failed to comply with the disclosure requirements of the federal securities law, but also admitted that the securities transactions they wanted to register were not actually securities transactions at all.”

Hirsch clarified that issuers must provide the required disclosure information to the SEC. However, the SEC admitted non-cooperation from American CryptoFed during its examination of its registration statement.

Based on information made available to the public, Hirsch shared the SEC’s intentions regarding the DAO:

“The Division of Enforcement is seeking to terminate American CryptoFed’s registration to protect investors from misleading information.”

Speaking to Cointelegraph, CryptoFed America’s chief operating officer and organizer Xiaomeng Zhou argued against the SEC’s claims, saying that Section 8(d) of the Order can only apply to effective Registration Statements. To the extent that Section 8(d) of the Order is applied to the Registration Statement, which is “pending and not yet effective”, it is applied to the wrong subject and violates the law because the “effectiveness of the registration statement” is not yet. yet and Section 8(d) of the Order cannot stop the subject matter that does not exist, explained Zhou.

As for American CryptoFed DAO’s Form S-1 Registration Statement which is “pending and not yet effective”, it is the subject of an Order of Denial Section 8(b) of the Securities Act of 1933 which clearly states “The Commission may, […] issuing an order prior to the effective date of registration refusing to permit such statement to become effective until it has been amended in accordance with such order.

As a result, American CryptoFed DAO’s Form S-1 is subject to Section (a) and Section 8(b) of the Securities Act of 1933, according to Zhou. He added:

“Section 8(b) of the Securities Act of 1933 only allows the SEC to issue a Refusal Order to provide clearer guidance for the American CryptoFed DAO to complete its Form S-1 registration (not a Stop Order).

Zhou reiterated that Section 8(b) of the Securities Act of 1933 allows the SEC to issue a Refusal Order and provides clear guidance for completing the Form S-1 registration. However, it does not allow federal agencies to issue a Stop Order:

“As a result, the SEC misused the Securities Act of 1933 to delay, halt and obstruct American CryptoFed DAO’s lawful disclosure through its Form S-1 Registration Statement.”

Cointelegraph found that the official Telegram channel for DAO has been disabled.

The official Telegram account of American CryptoFed was not found. Source: Cointelegraph (via Telegram)

However, the deletion of the Telegram account has not yet been linked to the SEC investigation at the time of writing.

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