KMK Law Corporate & Securities Blog

Several companies have asked us about the status of registrations and qualifications of security token offerings (STOs) / initial coin offerings (ICOs) with the Securities and Exchange Commission. There is not much to report.

SEC “Bedbug” Letter

On June 15, 2018, the SEC published its first “bedbug” letter to address a proposed token offering by Monster Products, Inc. The letter indicated that the SEC would not review Monster’s Form S-1 registration statement due to the significant deficiencies contained in the S-1.

Monster originally filed its Form S-1 on May 25, 2018 related to an offering of up to 300 million Monster Money Tokens which could be utilized by customers to purchase Monster products and services on Ethereum blockchain technology. The Form S-1 provided that the Tokens would be priced at $1.00 per Token and would have given holders of the Tokens the right to convert into Monster common stock in the event the Tokens were not trading on a cryptocurrency or U.S. stock exchange by mid-2020.

In response to Monster’s Form S-1, the SEC filed its “bedbug” letter, which is a staff letter that addresses those registration statements on which the SEC refuses to provide comments due to significant deficiencies. The letter provides the SEC’s rationale for not reviewing Monster’s Form S-1. Although the letter is brief and does not provide much detail regarding the SEC’s refusal to provide comments to Monster’s registration statement, the letter does state that the Form S-1 failed to comply with applicable federal securities regulations.

Monster’s Form S-1 registration statement can be found here, and the SEC staff letter can be found here.

Current Status of Form S-1 and Form 1-A Offerings

As of the date of this blog, there has only been one Form S-1 registration statement filed with the SEC that involved the offering of tokens. This $75 million Initial Coin Offering (“ICO”) was conducted by The Praetorian Group.

The Form S-1 registration statement can be found here.

Regarding Form 1-A offerings, there have been three offering statements filed with the SEC to date involving the offering of tokens. The first entailed a $10 million offering by Gab AI Inc. (“Gab”), the second offering of $50 million was conducted by Prometheum, Inc. (“Prometheum”) and the third involved an offering of $50 million by Knowbella Helix Inc. (“Knowbella”).

Gab’s Form 1-A offering statement can be found here, Prometheum’s Form 1-A offering statement can be found here and Knowbella’s Form 1-A offering statement can be found here.