Cryptocurrencies The SEC Will Target: Here Are The Clues!!

The sec recently revealed that it Considers nine crypto currencies to be Securities as part of its ongoing Investigation into insider trading by a Coinbase employee Now this begs the question of why the Sec thinks these nine cryptocurrencies Are securities and whether the regulator Could start targeting similar Cryptocurrencies using the same criteria That’s why today i’m going to examine The sec’s official complaint identify The criteria the sec are using to Classify cryptocurrencies as securities And tell you which cryptos are at risk [Music] Before we talk about the sec there’s Something you need to know about me i am Not a financial advisor as you can Hopefully see education and Entertainment are the only things i have For thee so please contact a financial Advisor if your crypto bags have left You bereaved Now if this is your first time visiting The channel my name is guy and the coin Bureau is on the front lines of the Crypto battle Our mission is to create high quality Crypto content that will make the Financial system rattle Coins tokens news and reviews are just a Few of the topics that we tackle If this sounds good to you subscribe to

The channel and ping that notification Bell it’s not a hassle Now that i’ve got that off my chest Let’s see which cryptos the sec is Targeting and which ones are next Okay quick bit of background the Securities and exchange commission or Sec regulates the issuance and trading Of assets classified as securities in The united states Securities includes assets like stocks Bonds and even some cryptocurrencies The sec determines which assets are Securities using the howie test which Consists of four criteria you use money To buy it the price action is the same For everyone who buys it you’re Expecting to make a profit and this Expectation of profit is coming from an Identifiable third party Pretty straightforward Now obviously almost every single Cryptocurrency meets the first three Criteria of the howie test it’s the Fourth criterion where things get Complicated because you can’t always Identify a third party that’s creating The expectation of profit you hope to Get when you invest in a particular coin Or token In a 2018 speech former sec director Bill hinman famously stated that Ethereum’s ethcoin is not a security Because ethereum is quote sufficiently

Decentralized In other words there are multiple third Parties creating the expectation of Profit from investing in eth Now the problem is that the sec never Explained what counts as sufficiently Decentralized and if you watched our Video about decentralization in Cryptocurrency you’ll know there’s much More to a cryptocurrency’s Decentralization than the number of Validators or developers This lack of regulatory clarity has made It extremely difficult for crypto Projects and crypto companies to comply With the sec and it has also given the Sec the ability to crack down on crypto Projects and companies that clearly Aren’t issuing or trading Cryptocurrencies that classify as Securities The best example here is stable coins Which sec chairman gary gensler believes To be analogous to stocks in the Companies that issue said stable coins This makes absolutely no sense in the Context of the howey test because stable Coins are pegged to fiat currencies and Therefore carry no expectations of Profit These inconsistencies have left many Crypto projects crypto companies and Even pro crypto politicians asking what Kind of criteria the sec is using to

Classify coins and tokens as securities And if you’ve watched any of our videos About the sec hearings you’ll know that The sec ain’t answering All the while the sec’s scrutiny of the Crypto industry has been increasing with The regulator starting to target Cryptocurrency exchanges like coinbase Over its alleged listing of securities a Move which could do serious damage to The crypto market while killing the Coins and tokens in question It looks like there’s no stopping the Sec now that it’s on the warpath and That means the only thing we can do as Crypto holders is to try and best assess Which cryptocurrencies the sec is likely To target and which ones will be safe From the slaughter This ties into the document you see here It’s the sec’s complaint against a Coinbase employee who allegedly leaked Information about upcoming crypto Listings on the exchange to his brother And best friend bagging them over 1.1 Million dollars In this document the sec classifies nine Of the 25 cryptocurrencies that this Trio allegedly used for insider trading As securities something that made the Crypto headlines and something that may Have even served as the springboard for The sec’s aforementioned investigation Into coinbase over securities listings

In any case the sec’s analysis of these Nine cryptocurrencies could offer some Clues as to what criteria it’s using in Practice to pounce on crypto projects Funnily enough the sec notes on page Eight of the complaint that it uses the Howey test to classify cryptocurrency as Securities which is clearly not the Whole story On page 22 the sec adds that quote each Of the nine crypto asset securities were Offered and sold by an issuer to raise Money that would be used for the Issuer’s business in other words the Entities behind these crypto projects Conducted icos and planned to use the Proceeds to build their products in the Next paragraph the sec further adds that Quote the issuers and the promoters of These cryptocurrencies made statements On social media and elsewhere claiming That the price of the coin or token will Appreciate due to the direct efforts of The entities behind these crypto Projects The sec also adds that quote some Issuers wrote white papers describing The project and promoting the offering Often in highly technical or Pseudo-technical terms and jargon and This is the perfect opportunity to Mention our video about how to read Crypto white papers correctly that will Be in the description

Shameless plugs aside the sec adds that Quote the issuers and promoters Emphasized the ability for investors to Resell these tokens in the secondary Markets on platforms such as coinbase That this was done quote both implicitly And explicitly And that issuers and promoters promised More grade a exchange listings The sec ends the preamble to its Analysis of these nine cryptocurrencies By declaring quote these hallmarks of The definition of a security continue to Be true for the nine crypto asset Securities that are the subject of the Trading in this complaint which means These cryptos could soon get wrecked So the first cryptocurrency on the sec’s Hit list is flexor network’s amp token For those unfamiliar the amp token is Used as collateral for crypto and fiat Payments made at merchants using the Flexor network This is to ensure that all payments are Final something that’s not always Guaranteed in cryptocurrency i’ll Quickly note that the company behind Flexa network is based in the united States Naturally the sec takes issue with the Icos that flex a network conducted for The fxc token the precursor to amp The sec also seems to take issue with The initial distribution of fxc probably

Because a substantial chunk of fxc’s Initial supply was allocated to the Founders and early team The sec goes on to explain that flexor Network announced it would be migrating Its fxc token to its new amp token on a One-to-one basis and if you watched our Video about the project you’ll know that We speculated this was done to sidestep Crypto regulations so that amp could List on coinbase It’s safe to say that this tactic didn’t Work and this seems to be because the Description of fxc in the flexicoin White paper was almost identical to the Description of amp in the updated amp White paper The sec also notes that the fxc to amp Conversion didn’t change the token’s Initial allocation After scrutinizing a series of Statements made in the amp white paper And by flexa network’s co-founder the Sec highlights the amp token’s Volatility noting that its price spiked By more than 10x from its all-time low To its all-time high and is now Basically back at its all-time lows The sec fails to mention that this is Part and parcel of the crypto bear Market but let’s not waste time Lecturing those who won’t listen The second cryptocurrency on the sec’s Hit list is rally network’s rally token

For those unfamiliar rally network is a Crypto project that seeks to make it Easy to issue social tokens including Nfts The rally token is used to govern the Components that make up rally network’s Ecosystem among other things I’ll quickly note that the company Behind rally network is based in the United states The sec again takes issue with the icos That were conducted by rally network Even though these icos were not Available to us citizens The sec seems to imply that it still Takes issue with the ico because the Rally token was made available to us Citizens on secondary markets This presumably includes dexes The sec again takes issue with the Initial distribution of rally namely the Large amount that was allocated to the Team The sec also notes that rally network Was explicit from the start that it Would use the funds it raised to build Out its ecosystem What’s scary is that the sec seems to Take issue with rally network’s Community treasury specifically the Allocation of resources that are Determined by the rally dao to improve The project now this is scary because it Suggests the rally dao itself is

Creating an expectation of profit Not surprisingly the sec takes issue With the statements made by rally Network and the company’s efforts to get The rally token listed on coinbase and Other top-tier exchanges What’s surprising is that the sec states Quote the centralized management team in The context of the rally dao This is surprising because it suggests That dow funding for development might Be fine so long as the allocation is not Going to a centralized team of Developers I’m also surprised that the sec made a Mistake in its complaint it states quote On september 2nd 2022 rally’s official Blog highlighted additions to the Leadership team and their credentials Including their past positions and Expertise Sounds like the sec has a time machine Because we’re in august are gary and co Even more powerful than we think Now as far as the sec is concerned the Final nail in the coffin for rally is Rally network’s own admission that the Crypto project is centralized Ironically it has stated that Centralization is the quote trade-off For an environmentally friendly Regulatory compliant and user-friendly Experience Come to think of it a lot of the

Climate-related criticisms of Cryptocurrency do seem to be an excuse To usher in more centralization you can Get the facts about crypto mining and The climate using the link in the Description i digress The third cryptocurrency on the sec’s Hit list is derivadex’s ddx token For the unfamiliar derivadex is a Decentralized finance protocol focused On derivatives like futures and options Hence the name Like many defy tokens the ddx token is Used for staking and governance i’ll Quickly note that the company behind Derivadex is based in the united states The sec starts by sniping the crypto Project with the following statement Quote the derivatex protocol is not and Never has been operational If that wasn’t clear enough the sec Takes issue with the fact that derivadex Is still incomplete despite being in Development for almost two years Next the sec notes the icos that Derivadex conducted and that the Derivadex team were allocated a Significant amount of the ddx token’s Initial supply The sec doesn’t like that the derivadex Team applied for ddx to be listed on Coinbase and it also takes issue with The retweets of the listing announcement By the team on twitter pretty nuts if

You ask me Interestingly the sec takes issue with The forward-looking statements i.e Roadmap-related milestones stated by the Derivadex team something i’ve mentioned In many crypto reviews as being a Regulatory risk for some crypto projects Glad to get that confirmation The fourth cryptocurrency on the sec’s Hit list is xyo network’s xyo token for Those unfamiliar xyo network is a crypto Project that seeks to create a Marketplace for decentralized data kind Of like oracle cryptocurrencies such as Chainlink I’ll quickly note that the company Behind xyo network is based In the united states So the sec begins by highlighting the Ico conducted by xyo network the initial Allocation of xyo tokens to the team the Roadmap provided by xyo network the Efforts by xyo network to get its token Listed on coinbase and other exchanges And the sharing of these listings on Social media The sec emphasized xyo network’s own Emphasis on the importance of its team In the long term success of the project As a point of contention as well This is unfortunate Because the fact of the matter is that The team can be what makes or breaks a Crypto project

Anyways the fifth cryptocurrency on the Sec’s hit list is rari capital’s rgt Token for those unfamiliar rari capital Is a d5 protocol and as with most d5 Protocols rgt is used for governance and Fee discounts i’ll quickly note that the Company behind rari capital is based in The united states The sec takes issue with the fact that The rari capital ico took place six Months prior to the completion of the Protocol This makes me wonder whether complete Crypto projects are safe from the sec But we’ll come back to that later Now the sec states that most of the Voting power on the rari capital Protocol is held by the ceo of the Company which is a big no-no regardless Of crypto regulations and in this case It underscores the idea that a dow could Be the identifiable third party creating An expectation of profit by proxy As with the other crypto projects Mentioned so far the sec lists all the Times that the rarity capital team made Statements that would create Expectations of profit among rgt token Holders some of these are actually quite Concerning For example quote the more money you Make the more money we make we want you To win and our algorithms make sure that You do

Yikes What’s wild is that the sec takes issue With the fact that rarity capital Provides the price of the rgt token on Its website and within its governance Dashboard Now to be fair the sec seems to be onto Something here because rarity capital Apparently referred to rgt token holders As shareholders which effectively Confirms that the project is treating Rgt as a stock in the company behind it If that wasn’t bad enough rari capital Has apparently referred to itself as the Lead developer of the protocol on many Occasions admitted to altering the Algorithms used on its protocol and even Confirmed that it holds the private keys To the smart contracts that make up the Protocol Never mind that rari capital was also Working hard to get rgt listed on Coinbase and other exchanges Now on that note if you’re interested in Learning about coinbase’s listing Criteria you can find out using the link In the description Anyhow the sixth cryptocurrency on the Sec’s hit list is the liechtenstein Crypto asset exchanges lxc token To be blunt this looks like another open And shut case given that lcx is an Exchange token and yes the exchange is Based in the microstate of liechtenstein

Not the united states If you watched our video about exchange Tokens you’ll know that this means that The liechtenstein crypto assets exchange Has been actively buying back and Burning the lcx token to pump its price This is akin to a stock buyback and is Therefore in violation of u.s securities Laws at least in the sec’s eyes Here the sec provides further Confirmation that the completion of a Crypto project plays a role in whether Its associated coin or token counts as a Security with the sec noting that the Exchange was up and running before the Token was issued Like most exchange tokens the lcx token Was issued via ico and a significant Chunk of its supply was held by the Exchange and you’ll know by now that These are things the sec really doesn’t Like The liechtenstein crypto assets exchange Also did all the same things the other Entities on the sec’s hit list did Namely posting about lcx on social media Making statements about the future price Action of the token talking about a Roadmap the usual stuff like i said open And shut So the seventh cryptocurrency on the Sec’s hit list is power ledger’s power Token for those unfamiliar power ledger Is a crypto platform that makes it

Possible to quote track trace and trade Energy in real time and the power token Is required to access the power ledger Platform I’ll quickly note that the company Behind power ledger is based in Australia By now you’ll know that the sec takes Issue with the icos conducted by power Ledger that the platform was not fully Operational at the time of these icos And that the power ledger team made Statements promising power token holders That gains were on the way for whatever Reason This includes a retweet by the power Ledger account which read quote Held power for four years now and i will Never sell well we’ll see what the sec Has to say about that Now the power ledger team pushing for The power token to be listed on Exchanges was once again another point Of contention as was the company’s own Admission of the central role it played In the crypto project’s development and Roadmap The eighth cryptocurrency in the sec Sniper scope is dfx finance’s dfx token For those unfamiliar dfx finance is a Stablecoin dex for stablecoins pegged to Non-usd fiat currencies As you might have guessed the dfx token Is used for governance and is earned via

Providing liquidity to stablecoin pairs I’ll quickly note that the company Behind dfx finance is based in canada Though for some reason the sec claims The company is not incorporated even Though i found the incorporation Information in two seconds someone Didn’t do their research That said i suppose the sec doesn’t care Too much about these details since They’ve already spotted the devil tfx Finance conducted an ico and the team Kept a substantial chunk of the initial Supply This is where things get a bit wonky Because the sec seems to believe that Providing liquidity to stablecoin pairs Somehow violates securities laws if the Token in question is being issued as an Incentive to provide said liquidity Which is the case with dfx finance The expectation of profit element seems To be based on a statement made by the Dfx finance team about how protocol fees Will eventually be paid back to dfx Holders The sec once again takes issue with Dfx’s real-time price being displayed on The website with statements made by the Team that suggests positive price action For dfx at some points in the future and The control the team has over the dex Protocol’s operation and development The final cryptocurrency on the sec’s

Hit list is chromatica finance’s chrome Token For those unfamiliar chromatica finance Is an order book-based decentralized Exchange which claims to be resistant to Front-running the chrome token is used To unlock features and pay for fees on The decks I’ll quickly note that the company Behind chromatica finance appears to be Based in the marshall islands based on Its linkedin profile which isn’t always A good source for this sort of stuff This is probably why the sec deemed the Company behind the project to be Unincorporated Now while chromatica finance claims to Have had a fair launch of its chrome Token it appears a substantial Percentage of its initial supply went to The team directly and indirectly at a Time when the order book based decks Hadn’t been built If i understand correctly the sec also Claims that chromatic finance was Secretly selling chrome while publicly Saying that its price was going to pump Not good if true Chromatica finance also told its Followers to quote buy low and sell high What’s interesting is the sec seems to Take issue with the regular development Updates being posted by the chromatica Finance team i seriously hope that the

Sec only takes issues with this because It’s coming from a centralized entity Because almost every single crypto Project in existence publishes updates So This brings me to the big question and That’s what exactly the sec’s criteria Are for classifying a cryptocurrency as A security and which coins and tokens Are at risk Well based on the sec’s recent complaint The following criteria could put a Crypto project at risk of a regulatory Crackdown First being based in the united states Five of the nine cryptocurrencies the Sec classified as securities are based In the us which puts them within arm’s Reach of the regulator This makes sense given that one of the Sec’s main motivations is arguably to Make as much money as it can from the Crypto industry in the form of fines and Fines are a lot easier to issue to Domestic entities Second conducting an ico especially an Ico where the founders and or team Retain a significant amount of the Token’s initial or future supply This isn’t such a bad thing as many will Know that too much control of the token Supply by the team is a point of Centralization that should be considered A red flag in your due diligence anyway

Third an incomplete platform or protocol Clearly the sec doesn’t like crypto Projects raising money before anything Has been built but once everything has Been built there’s less reason to raise Money As such it’s going to be interesting to See what the sec thinks about Retroactive public goods funding wherein Crypto companies and developers are paid By the crypto community long after the Crypto projects have been completed Fourth any statements made by the Company or team that could suggest that The coin or token could appreciate in Price at some point in the future This includes social media posts blog Posts and especially what’s said in the White paper heck even retweets are Enough to attract the sec’s attention This is why it’s so important to watch Interviews with the founders as part of Your research and as someone who does This regularly i can tell you that there Are some very high profile crypto Projects that have opened themselves up For attack from this vector Fifth the involvement of a centralized Entity in the project’s development and Management be it directly or indirectly Via voting power in a dow even if the Team doesn’t hold the majority voting Power in said dao The team or company should also not be

Mentioned in the white paper now if i’m Correct about this criterion then a lot Of crypto projects are at risk because Chain analysis recently found that the Voting power in most dows is heavily Concentrated among a handful of token Holders Lots of crypto projects mention their Teams in their white papers as well And finally the issuance of tokens as Part of liquidity mining programs as Mentioned earlier this final criterion Isn’t exactly clear and it may have been Unique to dfx finance given that the Team was explicit about the dfx token’s Future appreciation if people provided Liquidity to the protocol So long as this isn’t something Advertised by d5 protocols with Liquidity mining programs they may be Safe from the sec but based on sec Commissioner hester pierce’s comments Only the most decentralized d5 protocols Will survive the sec scourge An example of this could be a project Like ave and you can find out more about That project using the link in the Description And that’s all for today’s video about The real criteria the sec is using to Crack down on cryptocurrency if you Found it informative smash that like Button to let me know subscribe to the Channel if you haven’t already and ping

That notification bell so you know when The next video is ready While you wait you can check out coin Bureau clips for behind the scenes Action and emergency market updates and Tune in to the coin bureau podcast for Crypto rabbit holes and hot takes you Can also follow me on twitter tiktok and Instagram and see what i’m seeing in the Crypto market by joining my telegram If you want to know what cryptos i hold You can find out by subscribing to my Weekly newsletter and if you want to Support the channel cop something from The coin bureau merch store links to all These resources and more are waiting for You Down below Thank you all so much for watching and i Will see you in the next one this is guy Bidding you Goodbye [Music] You

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