Another reason not to violate Section 17(b)
CrowdCheck has blogged many times before about Section 17(b), the stock touting rule. Here’s where we outlined the basics more than ten years ago. Since then, the SEC has brought many Section 17(b) cases, some of them against some very well-known athletes and influencers. Some of those people were fined millions of dollars for promoting securities […]
The SEC’s not messing around on Form D filings.
On December 20, 2024, the SEC announced enforcement actions against multiple companies for failure to file Form Ds on a timely basis. As a quick refresher, under federal securities laws, any offering of securities must be registered or exempt. A registered offering is like an IPO, whereas relying on an exemption will mean you don’t […]
One solution at a time: Reg A and crypto
I was talking to a crypto-savvy SEC Commissioner the other day about my current obsession, which is that using the exemption under Regulation A is the way to address the constant complaint that “The Commission tells us to come in and register but we can’t make the registration process work for crypto.” As I mentioned […]
Lesson of the Month: The black box acquisition
Following up from last month’s I’m-not-going-to-call-it-fraud series, here’s another recent one. As always, identifying details changed. This one’s (problem is a clear omission of information required by the form filed with the SEC.) Form C says that if you raise funds in order to acquire another company, you must provide the target’s financials. This one […]
The SEC and crypto: the answer is Rule 261
A few years ago, we spent a lot of time with the Staff of the Division of Corporation Finance discussing the meaning of Rule 261(c) of Regulation A. “Rule 261 says Regulation A is for equity, debt or convertibles,” they would say (in more formal terms). “These things you are trying to qualify don’t look […]
Regulation CF fraud: Destiny Robotics
This is mostly a classic run-away-with-the-money case, combined with a bunch of misleading statements and omissions. But there are a couple of interesting twists here. What happened: Destiny Robotics Corp. raised funds under Regulation CF. The company used Wefunder’s “Lead Investor” structure, where the securities are held in an SPV and the Lead Investor makes […]
Lesson of the Month: The non-CFO
I was thinking of calling this series “Fraud of the Month” but didn’t want to go that far. You may reach your own conclusions as to whether that tag is warranted in any particular instance. While names and identifying details are changed, this is a true and recent story. Company raised funds in a Reg […]
Navigating the SEC’s Action Against Zymergen: Key Takeaways on Market Size Disclosures
On September 13, 2024, the SEC settled charges against Zymergen Inc. for misleading investors in its IPO by overstating market opportunities and revenue prospects for its product, Hyaline, resulting in a $30 million civil penalty against Zymergen. Zymergen’s finance team projected a market size using assumptions that were inconsistent with analysis conducted by its internal […]
Understanding Reg CF Resale Restrictions
Understanding Reg CF Resale Restrictions General rule: if you read the SEC rules with blinders on, you are probably well on your way to getting yourself in trouble. Rule 501 of Regulation Crowdfunding states that shares issued in a Regulation Crowdfunding offering “may not be transferred by any purchaser of such securities during the one-year […]
CrowdCheck provides additional updates to issuer-dealer registration requirements for sales of securities under Reg A without a broker
One of the exciting things about securities law is that rules can and do change in response to concerns raised by companies and investors. We have seen this first hand in regards to the requirements for companies to register themselves as dealers of securities to sell their own securities in offerings qualified under Regulation A. […]