Blockchain Week in Review: Week of June 7, 2019

U.S. Developments

SEC Sues Social Media Company Kik over Digital Coin Offering

The Securities and Exchange Commission (“SEC”) sued Kik Interactive Inc. (“Kik”) in federal court in Manhattan this week, arguing that Kik’s sale of “Kin tokens” in late 2017 was a sale of unregistered securities. The complaint alleges that Kik marketed its tokens as an investment opportunity and failed to disclose material financial information about Kik’s business. Kik has argued previously that the Kin tokens were not sold as securities and should not be covered by federal law because they are not considered stocks or bonds under relevant definitions of the U.S. securities laws.

As previously reported on this blog, Kik submitted a Wells response to the SEC in November 2018 laying the groundwork for potential litigation with the SEC. Last month, Kik established a legal defense fund,, to assist with its legal bills incurred fighting the SEC’s suit. The fund has raised almost $5 million worth of various cryptocurrencies from backers. Continue Reading

Webinar – The Next Progression of Derivatives Markets – Distributed Ledger Technologies and Decentralized Exchanges

Join Perkins Coie and FIA for a webinar “The Next Progression of Derivatives Markets – Distributed Ledger Technologies and Decentralized Exchanges.”

Thursday, June 20, 2019
10:00 a.m. – 11:00 a.m. EST


Smart contracts, digital assets and distributed ledger technologies make it possible to execute financial transactions in a peer-to-peer fashion with little to no intermediation by third-parties.

Join us for this timely webinar, hosted by the Futures Industry Association’s Law & Compliance Division, as we discuss the mechanics of such platforms and how they fit within existing regulatory frameworks, including the application of the federal commodities, securities and money services laws to decentralized exchange platforms and technologies.


Andrew Cross
Perkins Coie, Partner
Kari Larsen
Perkins Coie, Partner
Michael Selig
Perkins Coie, Associate

Questions? Please contact Mary Freeman via email.

China Released First 197 Blockchain Information Service Providers

On March 30, 2019, the Cyberspace Administration of China (CAC) released the first list of 197 blockchain information service providers that successfully registered pursuant to the Administrative Regulations on Blockchain Information Services. The list includes well-known Chinese internet companies such as Baidu, Alibaba, Tencent and, financial institutions like Ping An, China Zheshang Bank and Webank, as well as other blockchain information service providers such as Wanxiang and Beijing Internet Court. There are no true foreign companies that are allowed to register, at least not at this time.

Such record filing is only for the registration of blockchain information services and is not interpreted to mean that any entity, product or service has been recognized or approved by the CAC. As a result, a registered entity or individual is prohibited from using the record filing for commercial purposes.

Read more to learn more about the liabilities of blockchain companies in China and more information of the record-filing management system.

Blockchain Week in Review: Week of May 31, 2019

U.S. Developments

U.S. Federal Regulatory Developments

SEC Staff Holds FinTech Forum to Discuss Blockchain Technology and Digital Assets

On May 31, 2019, the staff of the U.S. Securities and Exchange Commission (“SEC”) held a FinTech Forum to discuss distributed ledger technology and digital assets.  It was hosted by the SEC’s Strategic Hub for Innovation and Financial Technology.  The FinTech Forum’s agenda and its speakers can be found here.

Members of Congress Write a Letter to the National Economic Council in Favor of Blockchain Technology

On May 24, 2019, seven bipartisan members of the U.S. House of Representatives sent a letter to Lawrence Kudlow, the Director of the National Economic Council (“NEC”), urging the Administration, through the NEC, to hold a forum on blockchain technology.  Citing the President’s most recent State of the Union Address, the letter asks that blockchain technology be included in the Administration’s initiatives to promote emerging technology.  It also argues that while government agencies are already using blockchain technology in operations, more can be done to support the adoption and development of technology in the United States.  The letter suggests that the NEC host a forum including policymakers, the private sector, and academia to help promote technology innovations and identify how to appropriately update laws and regulations. Continue Reading

Blockchain Week in Review: Week of May 24, 2019

U.S. Developments

Regulatory Updates

SEC Files Enforcement Action Against Alleged Fraudulent Cryptocurrency Pyramid Scheme

On May 22, the Securities and Exchange Commission (“SEC”) filed a complaint in the U.S. District Court for the Central District of California against Daniel Pacheco, owner of two California-based companies known as IPro Solutions LLC and IPro Network LLC (collectively, “IPro”).  The SEC’s complaint alleges that IPro raised more than $26.5 million in investments via the offer and sale of “IPro packages,” which included instructional materials for e-commerce activities and a recruitment-based compensation plan that paid its members in a cryptocurrency called “PRO Currency.” According to the SEC, IPro’s activities constituted an unlawful unregistered sale of securities because the sale of IPro packages involved an investment in the form of the PRO Currency digital assets, which were not registered and were not eligible for a registration exemption.  The SEC also alleges that the sale of IPro packages involved an investment in a pyramid scheme.  Framed as a multilevel marketing campaign with the goal of developing a blockchain-based e-commerce network, IPro offered recruitment bonuses to its users in the form of points that could be converted into PRO Currency and also offered points and cash commissions to incentivize users to make additional investments in the network.  The SEC alleges that Pacheco and IPro misappropriated more than $5 million in funds, resulting in IPro having insufficient funds to pay commissions and bonuses to its users. Continue Reading

Blockchain Week in Review: Week of May 13–17, 2019

U.S. Developments

Regulatory Updates

SEC Continues to Delay Decision on Bitwise ETF

On May 14, 2019, the U.S. Securities and Exchange Commission (“SEC”) continued its delay on a decision regarding a bitcoin exchange-traded fund (“ETF”) application. A decision regarding the ETF application, filed by Bitwise Asset Management and the NYSE Arca exchange earlier this year, has been delayed several times by the SEC. The SEC is requesting public comment from interested parties on the proposal. This is one of several crypto ETF applications currently in front of the SEC. Continue Reading

Blockchain Week in Review: Week of May 6–10, 2019

U.S. Developments

Regulatory Updates

CFTC Publishes Enforcement Manual

On May 8, 2019, the U.S. Commodity Futures Trading Commission’s (“CFTC”) Division of Enforcement (“DOE”) published its first public Enforcement Manual (the “Manual”). The Manual establishes general policies and procedures for the DOE’s work in investigating and prosecuting violations of the Commodity Exchange Act. Director of Enforcement James M. McDonald commented on the release at the 41st Annual Conference of the Future Industry Association’s Law & Compliance Division, noting that the Manual was publicly released to ensure that the procedures applied by the DOE in investigating and litigating potential violations of the Commodities Exchange Act and regulations thereunder are available to those potentially affected by them. The CFTC has previously asserted that virtual currencies are commodities and has regularly brought enforcement actions against companies and individuals in the virtual currency market. Continue Reading

Blockchain Week in Review: Week of April 29 – May 3, 2019

U.S. Developments

Regulatory Updates

SEC Suspends Trading for Crypto Exchange and Mining Company

On April 29, 2019, the U.S. Securities and Exchange Commission (“SEC”) announced that it was suspending trading for Bitcoin Generation (“BTGN”), a cryptocurrency exchange and mining company, until 11:59 p.m. ET on May 10, 2019, due to concerns about the accuracy and adequacy of information in the marketplace.  Specifically, the SEC was concerned about “(1) BTGN’s public statements regarding the viability and valuation of a bond that BTGN purportedly acquired from an entity based in the United Kingdom; (2) the amount of BTGN’s outstanding common stock; (3) stock promotional activity relating to BTGN and the market impact of such promotional activity; and (4) the accuracy and adequacy of current public information regarding BTGN’s financial condition.”  BTGN merged with Inolife Technologies and Inolife Technologies Operations in 2018 and offers two ERC20 tokens, the BTGN token and the Bitachon token.  BTGN holds itself out as specializing in the development of blockchain technology applications, cryptocurrency mining and operating a “publicly traded cryptocurrency exchange.” Continue Reading

OFAC Issues Sanctions Compliance Program Guidance

The Office of Foreign Assets Control (OFAC) administers and enforces U.S. economic sanctions programs in accordance with U.S. national security and foreign policy. OFAC had not previously published guidance addressing essential elements for an effective sanctions compliance program (SCP). It has now done so.

Specifically, on May 2, 2019, OFAC published guidance entitled “A Framework for OFAC Compliance Commitments.” OFAC’s Framework clearly establishes the agency’s expectations regarding an effective SCP. Given the importance OFAC places on an effective SCP in its enforcement decisions including the determination of the amount of any civil penalty, companies with international activities should consider whether to update their SCP to meet the agency’s standards.

In this update, we detail the OFAC Framework and outline several OFAC sanctions compliance breakdowns to avoid.


Blockchain Week in Review: Week of April 22-26, 2019

U.S. Developments

New York Attorney General Announces Filing in Connection with Tether, Bitfinex Investigation

On April 25, 2019, New York Attorney General Letitia James announced that her office obtained a court order enjoining iFinex Inc., operator of the Bitfinex trading platform, and Tether Limited, issuer of “tether” virtual currency, from further violations of New York law in connection with potential acts of fraud.  Bitfinex’s response to the Order can be found here.

New York’s Office of the Attorney General has expressed concern regarding the potential for conflicts between the interests of virtual asset trading platforms, platform insiders, and customers, and one of the primary objectives of this Order is to address the potential loss of customer funds.  Continue Reading