ICO

In the Matter of Tomahawk Exploration LLC: No Such Thing as a Free Launch

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The issuance of digital tokens in exchange for services rather than money still can constitute an offering of securities, according to findings recently made by the Securities and Exchange Commission in a settled enforcement action, In the Matter of Tomahawk Exploration LLC and David Thompson Laurance, Securities Act Rel. No. 33-10530, Exchange Act Rel. No. 34-83839, Admin. Proc. File No. 3-18641 (Aug. 14, 2018). Tomahawk Exploration LLC offered and distributed digital assets in the form of tokens called “Tomahawkcoins,” or “TOM tokens” through an initial coin offering (“ICO“). The company offered a “Bounty Program,” whereby Tomahawk dedicated 200,000 TOM tokens to pay third parties, offering between 10 and 4,000 TOM tokens in exchange for the following activities:

  • marketing efforts;
  • making requests to list TOM tokens on token trading platforms;
  • promoting TOM tokens on blogs and online forums such as Twitter or Facebook;
  • creating professional picture file designs;
  • YouTube videos, other promotional materials; and
  • online promotional efforts that targeted potential investors and directed them to Tomahawk’s offering materials.

Read the full Orrick-published article here.

Swiss FINMA Publishes ICO Guidelines

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In guidelines published on February 16, the Swiss Financial Market Supervisory Authority (“FINMA“) sets out how it intends to apply financial market legislation in handling enquiries from initial coin offering (ICO) organizers. The guidelines also define the information FINMA requires to deal with such enquiries and the principles upon which it will base its responses, creating clarity for market participants.

In particular, the guidelines contain very helpful definitions of (i) “Payment Tokens,” which are synonymous with cryptocurrency and have no further functions or links to other development projects, (ii) “Utility Tokens,” which are tokens which are intended to provide digital access to an application or service, and (iii) “Asset Tokens,” which represent assets such as participations in real physical underlyings, companies, or earning streams, or an entitlement to dividends or interest payments — in terms of their economic function, Asset Tokens are analogous to equities, bonds or dividends. That being said, FINMA noted that “hybrid forms are possible”. Release.

Findings from ICO Visits to Credit Reference Agencies

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On September 30, the UK Information Commissioner’s Office (ICO) published a review of the manner in which personal data is processed by credit reference agencies (CRAs).

Although the report focuses on CRAs, the ICO states that the issues highlighted are equally relevant to other organizations processing large amounts of personal data and to lenders who share information with CRAs.

The report identified certain areas that could be improved, including implementing a process to remind organizations supplying data to CRAs of their obligations under the Data Protection Act 1998, and a system to ensure that all CRAs’ clients are audited at least once a year.

The appendices to the report provide advice for firms relating to each of the topics covered by the report including training, staff awareness, data sharing, monitoring and reporting issues and information risk management.  Report.