SEC’s Crackdown Criteria: Which Crypto Projects At Risk!?

Which cryptocurrencies are at risk of an SEC Crackdown well the regulator's Recent lawsuit against bittrex offers Some Clues the SEC argued that six Cryptos The Exchange listed were Unregistered Securities meaning that These crypto projects are illegal in the United States The lawsuit took the crypto Community by Surprise because it alleges that Algoran's algo is a security and yet SEC Chairman Gary Gensler had basically Promoted the project when he was Teaching at MIT Sylvia mccallie's Algorand Sylvia's got a great technology Leo macaulay's algorand he's a professor Over the computer science and AI lab That's why today I'm going to unpack the Sec's reasoning for why these cryptos Are securities explain which cryptos are At risk of getting wrecked and assess Whether Gary broke his own agency's Securities laws I'll start by addressing the elephant in The room besides algorand the five other Cryptocurrencies the SEC referred to as Securities in its lawsuit are Dash OMG Network monolith Naga and iht real Estate protocol I'll leave a link to the full lawsuit in The description if you're interested now Before I break down the sec's reasoning It's important to understand how the SEC Sees the crypto industry and what

Criteria it uses to determine whether a Crypto is a security For anyone unfamiliar a security is an Asset like a stock in a company Issuers of Securities in the United States must register with the SEC now According to the Howie test which is Almost 100 years old an asset is a Security if you buy it using money if The price action of the asset is the Same for everyone who invested if there Is an expectation of profit and if there Is a third party be it an individual or Group creating this expectation of Profit obviously almost every single Cryptocurrency meets the first three Criteria of the Harry test it's the Fourth Criterion where things become Less clear For example back in 2018 a former SEC Director famously said that ethereum's Eth was not a security because it was Sufficiently decentralized Ever since that time there's been lots Of debate about what sufficiently Decentralized means and the SEC has yet To provide any clarification Sufficiently decentralized is generally Assumed to mean that it's not possible To identify a third party that is Creating the expectation of profit from Investing in a crypto this makes sense Because if there's no identifiable third Party driving an expectation of profit

Then there's nobody the SEC can Target For context an SEC Crackdown results in A crypto being delisted from U.S Exchanges and made off limits to retail Investors this can crash its price and Even kill the project On that note the SEC seems to believe That every crypto exchange is offering Unregistered Securities in other words Their listing cryptos or offering crypto Products that require them to register With the SEC this is why the SEC has Been targeting exchanges like coinbase And why it recently sued bittrex However You watched our recent summary of Gary's Testimony in Congress you'll know that The sec's criteria for cracking down on Crypto companies and projects has been Inconsistent it's this regulatory Uncertainty that caused bittrex to Shutter its U.S operations and why other U.S exchanges could soon follow suit That said the lawsuit alleges some Damning stuff about bittrex and offers Evidence for these accusations its Executives allegedly effectively coached Crypto projects interested in listing on The U.S exchange about how to avoid Sec's scrutiny this instruction included Removing information about things like Ico funding the most damning piece of Evidence the SEC provides is a cheat Sheet that bittrex allegedly gave to

Employees when assessing whether a Crypto project could list on the U.S Exchange it specifically notes quote Public price prediction statements or Expectations of profit which you'll Recall is a big No-No now to be Absolutely clear none of the cryptos the SEC listed as Securities in its lawsuit Against bittrex have been sued by the SEC at least not yet I repeat as I Record this none of the cryptos on this List have been officially targeted by The SEC so let's now dig into the sec's Reasoning as to why six of the cryptos That bittrex offered are supposedly Securities I'll order them by market cap So first up is algoran's algo now the Suit Begins by explaining that algorand Was founded by MIT Professor Silvio McCauley and that algo is the native Token of the algorand blockchain algo is Technically a coin but let's not go There the suit goes on to note that the Algorand foundation conducted an Ico for Algo in June 2019. it takes issue with This along with the algorand Foundation's promotion of the Ico on Twitter It also takes issue with the subsequent Repurchase of the algo sold during the Ico by the algorand foundation if you've Watched any of our videos about algorand You'll note that this repurchase Occurred because algo's price had

Plummeted almost all the algo sold During the Ico was repurchased and the Authors of the lawsuit take issue with The algorand foundation's redistribution Of these repurchased coins The authors then analyze algo through The lens of the Howie test they identify The algorand foundation and algorand Inc As the third parties they take issue With statements made by its Executives And the algoran foundation's algo Holdings which the authors say amount to 500 million algo the authors also say That the agarand foundation controls an Additional 3 billion algo which was Earmarked for governance and ecosystem Incentives they go on to give a long List of examples of things algorand Inc And the algorand foundation have done or Said to drive expectations of profit This list of statements includes a Sentence from the algorand Inc website Which notes that it has an experienced Team the list also includes statements Related to efforts by both parties to Grow algorand's ecosystem be it by Offering developer incentives or even Just setting up a developer Hub online The suit's authors conclude with code These statements LED reasonable algo Investors throughout the relevant period To expect that the demand for algo would Likely increase based on algorand inks And algorand foundation's efforts to

Increase demand for the algorand Technology thereby resulting in a price Increase for algo Not surprisingly the list is missing Statements made by SEC chairman Gary Gensler during an MIT speech where he Said quote Sylvia McCauley's algorand who is a Touring Award winner at MIT that I work With Silvio's got a great technology That has performance you could create Uber on top of it now this is almost Identical to the statements the authors Took issue with in the bittrex lawsuit This begs the question of whether Gary Will be targeted by his own agency as Explained by decrypt the answer is no Unless the SEC takes algorand to court And proves that algo is a security then Things could get interesting for what It's worth I think this is very unlikely Besides the fact that it could backfire On Gary he does seem to be very good Friends with Silvio this could explain Why Silvio isn't one of the executives Mentioned as having made problematic Statements about algo even though well He's made similar ones in any case the Next crypto on The Chopping Block is Dash the authors Begin by explaining That Dash is a fork of Bitcoin created In February 2014 by software developer Evan Duffield notably the author's note That quote Dash is a crypto payment

Platform perhaps that's the real reason It's being targeted regardless the Authors go on to say that Dash is the Native token coin of the dash blockchain And that the quote platform has built Multiple apps that are available on web And mobile devices they also say that The initial distribution of Dash was Quote in the form of rewards to miners That provided value now if you watched Our video about Dash from way back in 2020 you'll know that no Ico was Conducted it was one of the few Cryptocurrencies that was fairly Launched now this is concerning because It suggests that even fairly launched Cryptocurrencies could be targets of the SEC scrutiny but that's just part of the Story as I suspected the authors take Issue with the fact that Dash has Switched to using masternodes to secure Its blockchain they specifically take Issue with the fact that 10 of block Rewards are sent to the dash treasury Which is controlled by these masternodes And that masternodes essentially control Dash this is again concerning because According to Dash's documentation there Are almost 4 000 masternodes This ties into the question of what Sufficiently decentralized means in the Eyes of the SEC Apparently having thousands of nodes Scattered around the world is not

Decentralized enough it also relates to Something I mentioned in our Dash video And that's that Dash has faced SEC Scrutiny before in 2018 the SEC asked Crypto exchanges in the US whether they Thought Dash was a security the CEO of Dash core group met with the SEC to sort Things out and this seemed to have Worked now this relates to something Gary mentioned in his recent testimony And that's that if a crypto project is Sending people to Lobby politicians or Speak to Regulators then it's a security This may have played a part in putting Dash on the sec's radar but it's not Listed as one of the reasons in the Bittrex lawsuit what is listed as one of The reasons is the fact that Evan Invented and developed many of the Technologies that Dash uses now this is Crazy because it suggests that Bitcoin Could be labeled as a security if Satoshi nakamoto's identity is ever Revealed consider that Evan left Dash Way back in 2017 As expected the authors take issue with Statements on the dash website and Statements made on Dash's social media Accounts these include statements about Dash being a fast and effective payment System and statements which identify the On-chain entity controlled by Masternodes as the third party what's Not expected is that the authors take

Issue with the fact that Dash quote has A limited Supply and is deflationary in Nature which is of course designed to Increase its value this is scary because Ethereum's eth is also deflationary Which is likewise designed to increase Eth's value over time speaking of which Dash's use of proof of stake via Masternodes could be another Contributing factor in the sec's Assessment this is because Gary believes That proof-of-state cryptos could be Securities Fortunately or unfortunately this is not Listed as one of the reasons for the Scrutiny of daesh in the bittrex suit Now the third crypto that got called out Is OMG Network OMG is actually the first Crypto the authors criticize this Ordering could be a coincidence but I Don't think it is that's because OMG is Mentioned more times in the lawsuit than The other five cryptos mainly as an Example of a security the suit's authors Begin by explaining that OMG network was Founded in 2017 when it was known as Amisego They explained that in December 2020 the Project was acquired by a Hong Kong VC Firm and subsequently partnered with Another unspecified entity in February 2021 to create the Boba Network they go On to explain that OMG network is a Proof-of-stake cryptocurrency and held

An Ico for the OMG token in June 2017. This time the authors go into extreme Detail about how these Ico funds were Used and why that constitutes the Establishment of a common Enterprise Under the Howie test They also go into extreme detail about All the statements in the initial white Paper and the original website that they Take issue with as with algorand they go Into detail about all the different Statements made by OMG networks Executives including the former CEO who I'll come back to in a moment The suit's authors also take issue with Comments made by the Hong Kong team that Took over the project one of these was a Tweet where they said they will continue To quote accelerate the adoption of OMG Network as the value transfer layer for Hashtag ethereum this suggests layer Twos could be at risk but back to OMG Network's CEO Now for those unfamiliar vanza chatty Cavanish was the CEO and co-founder of OMG Network until it was bought out in Late 2020 vansa is a very peculiar Character she used to work for the World Bank where she helped secure funding for Infrastructure projects in Southeast Asia this is significant because the World Bank has close ties to the US Government if OMG network was in any way Affiliated with the US government it

Could explain why it seems to have a Special place on The sec's Hit List in This bittrex suit being owned by Hong Kong VCS could mean it's now affiliated With China even if this isn't the case OMG Network's over-representation in the Bittrex lawsuit is still significant Because the project has very close Connections to ethereum believe it or Not but ethereum Creator Vitale buteran Helped create OMG Network he's actually Credited in the original White paper not only that but Joseph Poon was one of the co-authors of the Original amisego white paper If you've watched our video about the Lightning Network or any of our videos About polygon you'll know Joseph Co-created the lightning Network and Even the plasma scaling solution used by Polygon's POS chain what's strange is That Joseph apparently disappeared in 2018 but that's a rabbit hole for Another video Conspiracies aside these facts are Further evidence of the idea that the SEC has an ax to grind with OMG Network It could be for geopolitical reasons or The sec's way of indirectly threatening Ethereum and directly threatening all The layer 2 scaling Solutions building On its blockchain this would make sense Considering that the U.S crypto Crackdown has focused on targeting

Crypto projects and companies that are Creating alternative Payment Systems Hence my earlier comment about dash part Of ethereum's purpose is to be a payment System and it's the explicit purpose of Its layer twos and come to think of it Monolith falls into this bucket as well Per the lawsuit quote in 2017 monolith Studio based in London England announced The launch of token card porting to be The first debit card powered by smart Contracts incorporating the Visa Payments network with ethereum The sec's reasoning for monolith's tkn Token is predictable there was an Ico The white paper had lots of Forward-looking statements the Expectation of profit was coming from an Identifiable third party and the token Had a buy back and burn mechanism Good tokenomics are not allowed in Fiat Clown World in all seriousness it's the Same story as Naga coins NGC token there Was an Ico the white paper had lots of Forward-looking statements the Expectation of profit was coming from an Identifiable third party Etc etc the only difference is that NGC Didn't have a clear use case standard For most Ico bubble cryptos and finally There's the iht real estate protocol Which also appears to have been born of The Ico bubble I won't bore you with the Sec's reasoning it's the same as the

Previous two in fact it's almost Identical and the author's analysis of All three of these cryptos is Significantly shorter than the previous Three To clarify the authors first analyzed OMG Network then Dash then algorand and Then the last three cryptos in the order I just mentioned although OMG was Mentioned the most in the lawsuit the Section about algorand was the longest Now maybe I'm reading too much into Things but the ordering makes sense OMG Network because of geopolitics or just To fat ethereum and its layer twos Dash To dump on cryptos that are specifically Designed to be payment systems or to Flood any privacy features and algorand Because its blockchain is arguably a Direct competitor to the fed's upcoming Fed now payment system consider that MIT Was working with the FED on its cbdc Research and that the Fed was planning To explore Quantum resistance last year Algorand founder Silvio McCauley teaches At MIT and algorand recently achieved Quantum resistance via state proofs but I'm sure it's all a big coincidence if You're not up to speed on cbdc Development you can check out our recent Video about that using the link in the Description I digress And now for the big question which Cryptos are at risk of being targeted by

The SEC well based on the sec's Reasoning in its bittrex lawsuit the Short answer is all of them except BTC Unless Satoshi comes back in which case BTC is also at risk Let's go ahead and assume that's not Going to happen a Satoshi Given that all cryptocurrencies besides BTC are at risk the more appropriate Question to ask is which cryptos the SEC Will prioritize targeting after all the Regulatory agency has limited resources And Gary probably wants to pick fights The SEC can win so that he can look good In the eyes of anti-crypto politicians The bittrex lawsuit suggests that the SEC is especially focused on any crypto Projects that could be direct Competitors to existing and future Payment Systems this makes sense Considering that Gary spent most of his Career at Goldman Sachs and the Anti-crypto politicians supporting him Are backed by megabanks The sec's recent enforcement actions Also suggest that the regulator is Trying to Target crypto companies and Projects that don't have the financial Capacity to fight back this makes sense Considering the SEC has learned the hard Way that going after a well-capitalized Crypto company like Ripple is a bad Strategy as such ask yourself which Crypto projects or Protocols are direct

Competitors to Future and existing Payment systems then ask yourself which Of these is struggling financially Because of crypto bear Market events now I can't name any names but I'll give you A hint one of them was on today's list Now whether being listed as a security By the SEC in this or any other lawsuit Increases the chance of an enforcement Action against a cryptocurrency remains To be seen but it's logical then again The SEC hasn't been logical and Name-calling could be the extent of its Enforcement against these cryptos If that's the case then I honestly have No idea which cryptos the SEC will Target next so far it's mostly mostly Been coins and obscure Russian Crypto exchanges that nobody has ever Heard of even so I have a gut feeling That the SEC will Target a big crypto Project soon if it does markets are Likely to react that's simply because There will be widespread speculation About whether similar crypto projects Are safe That's why I pray that the SEC won't Target a smart contract cryptocurrency Or a stable coin an attack on either Would cause serious crypto Market Volatility and all in the name of Investor protection And that's all for today's video If you Enjoyed it smash that like button to let

Me know and don't forget to subscribe to The channel and ping that notification Bell before you go If you're looking to cop a crypto wallet Or get paid to trade check out the coin Bureau deals page for massive discounts And trading bonuses you won't find Anywhere else link will be in the Description as always thank you all for Watching and I'll see you next time Adios ciao auf wiedersehen goodbye [Music]


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