The S.E.C. Crashed The I.C.O. Party, How Will the Fun Continue?

Darcrus is a project by Sigwo Technologies LLC. The company provides software and consultancy solutions for businesses on the cryptosphere and for legacy companies that want to integrate blockchain technology. Running on a buy-back & burn system, the Darcrus token (DAR) gives its holders a “share” of the profits made from selling the aforementioned services.

-A closer look at the Howey test and a few thoughts on how the I.C.O. Trend will be affected. 

The Securities and Exchange Commission (SEC) recently made public its intention to assess and regulate certain crowd funding projects known in the crypto-space as ICO’s or Initial Coin Offering. Similar to IPOs, Initial Coin Offerings consist of campaigns where newly-issued cryptocurrencies or tokens are sold to initial project backers for BTC, altcoins or fiat.

The SEC has a narrow job description which is to protect investors, to maintain fair and tidy markets, and to promote and regulate the formation of capital. They are in position with the purpose of preventing another extreme financial crisis like The Great Depression which the USA endured during the 1920’s and part of the 1930s.

Of course many generations have come and departed since the Great Depression, but when the earliest scars of the Depression formed atop the financially wounded,  thicker skin was the result, and The SEC was born. It is needless to say the SEC is a sincere, but stern bunch.

When the crypto-community began to loudly buzz with various, highly profitable ICO’s,  the SEC was made aware of the trend, and quickly issued a public bulletin announcing an investigation, with some warnings and educational offerings on the subject of ICO’s and the indicators that certain ICOs could be in direct violation of Securities Exchange Act of 1934.

The Courts can determine whether or not a subject is an investments contract by use of The Howey Test which got its name in 1946 from a Spirited farmer who owned and maintained agricultural property called “Howeys In The Hills”.

Howey went to bat against The Supreme Court when he wanted the right to sell pieces of his land in a profit promising business plan that he had already been operating.  He lost the battle when he failed the test that was subsequently named after him.

The Howey Test says if these 4 bullet points are true, then yes, it is an investment contract and thus, needs to be registered as a security with the SEC and follow guidelines set by the SEC.

You might be looking at a security that falls within the boundaries of the securities laws if…

  • There is an investment of money
  • It is in a common enterprise
  • There is an expectation of profits
  • Profits are derived from the efforts of others

How does Howey change the current ICO craze? 

In the cryptosphere, this SEC awareness and investigation presents a predicament that many will protest.  Conversely, when the SEC crashed the ICO party, it could be viewed as a relief, because as much as it kills the buzz, the under tone of the SEC and it’s ominous threats may thwart the onslaught of scam artists who have been salivating at the opportunities that come from the inexperienced ICO crowd.

Ever since the SEC started to pay attention to ICOs, projects have begun using the Howey test as a way to appease investors and while it is clear that the ICO phenomenon is far from over, the SEC’s latest intervention may help clear the space of scammers and poor-quality projects.

**This is not legal advice, nor is it financial advice. 

Read, research and investigate with the help of your own legal counsel and financial advisors.