What has happened?

In two separate actions that are both firsts for the agency, the US Securities and Exchange Commission (SEC) has charged and agreed penalties with two cryptocurrency firms and their owners.

What does this mean?

In the first case, the SEC announced that self-described "ICO superstore" TokenLot and its owners, Lenny Kugel and Eli L. Lewitt, will settle charges that "they acted as unregistered broker-dealers".

In its order, the regulator said TokenLot's website was promoted as "a way to purchase digital tokens during initial coin offerings and also to engage in secondary trading".

"Michigan-based TokenLot received orders from more than 6,100 retail investors and handled more than 200 different digital tokens, which the SEC found included securities", the SEC said.

The agency alleged that TokenLot, which operated from July 2017 to February 2018, and its owners should have registered as broker-dealers, but they had not.

In response to the SEC's investigation, Michigan-based TokenLot voluntarily began winding down and refunding investors' payments for unfilled orders.

TokenLot and its owners did not admit or deny the SEC's findings, but agreed to pay $471,000 in disgorgement plus $7,929 in interest.

Kugel and Lewitt also agreed to pay penalties of £45,000 each and "agreed to industry and penny stock bars and an investment company prohibition with the right to reapply after three years".

"The penalties in this case reflect the prompt co-operation and remedial actions by TokenLot, Kugel, and Lewitt," said Steven Peikin, Co-director of the SEC's Enforcement Division.

The SEC said this was its first case charging unregistered broker-dealers for selling digital tokens after it had issued The DAO Report in 2017, in which it cautioned that "those who offer and sell digital securities must comply with the federal securities laws".

In the second action, the regulator alleged that Crypto Asset Management LP (CAM) offered a fund that operated as an unregistered investment company while falsely claiming it was the “first regulated crypto asset fund in the United States."

In its order, the SEC said that California-based CAM and its principal, Timothy Enneking, raised more than $3.6 million in late 2017, while falsely claiming that the fund was regulated by the SEC.

"By engaging in an unregistered non-exempt public offering and investing more than 40 percent of the fund’s assets in digital asset securities, CAM caused the fund to operate as an unregistered investment company," the SEC said.

As in the first case, Enneking and CAM would also not admit or deny the SEC's findings against them.

However, they agreed to the agency's cease-and-desist order and will pay a penalty of $200,000.

The SEC said this was the "first enforcement action finding an investment company registration violation by a hedge fund manager based on its investments in digital assets".

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