With the amount of press around Bitcoin’s meteoric rise and subsequent plummet, my future-looking clients here in Mississippi have asked me whether these “cryptocurrencies’” are subject to the U.S. Security and Exchange Commission’s (SEC) whistleblower program. The answer is that they may be. The SEC stated in a July 2017 investigative report that “virtual tokens and coins may be securities subject to federal securities laws.” What that means is that fraud occurring in the context of initial coin offerings (“ICOs”) or other aspects of the creation or management of crypto currencies may be subject to the SEC’s whistleblower program.
A New Form of Money: Blockchain Technology
To understand how a whistleblower action might be brought in relation to a cryptocurrency ICO, you first must understand a bit about how cryptocurrencies work. Unlike traditional currencies that are created or “minted” by a country and are tied to some national monetary policy, cryptocurrencies are secured by blockchain technology. The security of the blockchain is their foundation and is what gives them worth.
But what is blockchain? Blockchains are a secure, electronic way of recording individual transactions. Each block in a chain contains data about a transaction between individuals—every transaction, in turn, is recorded and reflects the previous transactions that came before. The foundation of blockchain technology is the “linked’ nature of a chain. That linked nature creates a more secure environment for transactions, as it is not possible to change the records pertaining to a block, or record, in the extensive list of records without also altering all of the previous blocks. The blocks, in turn, are stored across a network of computers so that any change to the blocks would require complete coordination of those computers. This level of complexity also provides security. In the past, the strength of nations and their central banks acted as the foundation of a currency, now it is the strength of a currency’s computing capacity and mathematics.
Whistleblowers’ Roles in Blockchain ICO’s
Because of the somewhat mysterious nature of an ICO, the SEC has to rely on those working within the cryptocurrencies themselves to police them. The SEC’s whistleblower program allows those working within cryptocurrencies who have knowledge of securities violations to help the government stop fraud by offering a bounty equal to 10 to 30 percent of the penalties that the SEC collects if the total exceeds $1 million.
What Should You Do if You are Considering an ICO Whistleblower Claim?
For those working on ICO’s or within cryptocurrencies, the SEC is interested in knowing about fraud. There is more to filing a whistleblower case than just knowing about ICO fraud, however. All of the extensive rules that apply to the SEC whistleblower program will apply here as well. Specifically, you must have unique information that the SEC does not already have, and you must be the first to alert them to the fraud. To attain your compensation, you will require the help of an experienced whistleblower attorney to decide whether the conduct you have observed constitutes fraud. Evidence gathering, dealing with the federal government’s attorneys, important deadlines, and filing requirements make your representation both complex and time-sensitive. Barrett Law has this experience and is standing by to ease any concerns you may have about becoming a whistleblower.
Call Barrett Law now at (601) 790-1505 if you think you may be an ICO or cryptocurrency whistleblower.
Having expert legal advice by your side can mean the difference between receiving your share of a whistleblower judgment and losing your career and livelihood. Call us today.
