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SEC Shuts Down Munchee ICO (techcrunch.com) 43

The Securities and Exchange Commission has shut down Munchee, a company that built a $15 million token sale. According to TechCrunch, "The Munchee ICO aimed to fund the MUN coin, a payment system for restaurant reviews." However, the company "received a cease and desist from the SEC on December 11" because it constituted the offer and sale of unregistered securities. From the report: Within the SECs findings they noted that Munchee touted itself as a "utility" token which means that the company believed the MUN token would be primarily used within the Munchee ecosystem and not be used to fund operations. However, thanks to an application of the Howey Test (a Supreme Court finding that essentially states that any instrument with the expectation of return is an investment vehicle), the SEC found the Munchee was actually releasing a security masquerading as a utility. "Munchee offered MUN tokens in order to raise capital to build a profitable enterprise," read the SEC notice. "Munchee said that it would use the offering proceeds to run its business, including hiring people to develop its product, promoting the Munchee App, and ensuring 'the smooth operation of the MUN token ecosystem.'" The stickiest part? Munchee claimed that its coins would increase in value thanks to a convoluted process of growth.

In short, Munchee was undone by two things: depending on the token sale as a vehicle to raise cash for operations and using the typically spammy and scammy marketing efforts most ICO floggers use now, tactics taken directly from affiliate marketing handbooks. Fortunately, Munchee was able to return all $15 million to the 40 investors that dumped their coins into scheme.

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SEC Shuts Down Munchee ICO

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  • Now I can't get the MUNCHEEs. The FCC is such a buzzkill.

    • by Anonymous Coward

      This is SEC, not FCC. With FCC, you get some Pai.

  • "But if you tell them it's a bubble and worth nothing, we'll go broke!"

  • by Joe_Dragon ( 2206452 ) on Tuesday December 12, 2017 @05:10PM (#55728115)

    SEC will shutdown bitcoin soon!

    • How are you going to send a cease and desist to Bitcoin?
      • You prevent the companies that offer/back the securities on the regulated market. But of course, they wonâ(TM)t do anything about the off the counter trading.

        I thought SEC would restrict Bitcoin but CBOE shows otherwise. As far as I can tell that partially vindicated Bitcoin as a legal US security.

  • by goose-incarnated ( 1145029 ) on Tuesday December 12, 2017 @05:19PM (#55728197) Journal

    I'm starting to think that bitcoin can't pop (I'm not a bitcoin fan - check my posting history). The reason I say this is because the 4/transactions per second prevent an actual run starting on the commodity we call bitcoin.

    In order to have the bubble pop you need large number of sell-offs. With the miniscule rate of transactions it might not be possible for the bubble to pop spectacularly - it might simple deflate gently instead.

    • by jwhyche ( 6192 ) on Tuesday December 12, 2017 @05:35PM (#55728295) Homepage

      I've had thoughts like this too. The inherent flaws in the system might be enough to prevent a Wylie E. Coyote crash and burn. But again even if the bubble does simply deflate the result will still be the same. Millions will still be lost, it will just be drawn out and more painful.

    • In order to have the bubble pop you need large number of sell-offs.

      The price doesn't drop because people "take their money out." The price drops because no one will buy it at that price.

      So for example, if you buy a tulip bulb at a price of $1million, then suddenly no one will pay more than $10 for a tulip bulb, everyone with that kind of tulip bulb will lose their money. The bubble doesn't shrink, it shatters, and the money was already gone (into the pockets of those who sold before the bubble popped).

      • Not 100% sure of this, but imagine only one tulip bulb can be sold per week. We wouldn't know what price people are unwilling to buy it at, because by the time they did (or didn't) buy it the price would have changed.

        • The example seems kind of fuzzy. You'll have to explain a little more, then I can help you understand.
          • To discover the price you need active buying and selling, which you can't do if the transactions are slow.

            • It just adds an uncertainty. Just like buying and selling a house, which may happen only once every few decades.
        • You might not be able to do actual bitcoin transactions quicky, but you can trade inside the exchanges (until they collapse).

    • Do not underestimate the ability of businessmen to make creative instruments to fleece bitcoin holders of their money. Remember the fraudulent credit default swap and other esoteric financial instruments.
    • by Anonymous Coward

      This doesn't matter though. The majority of trading happens at the exchanges. Most people keep there money there to buy and sell quickly so no movement of bitcoin is needed.

  • and use forward looking statements to sell billions of shares and SEC would do fuck all even if all the shareholders lost their lifes savings.

Just go with the flow control, roll with the crunches, and, when you get a prompt, type like hell.