SFC’s regulatory action halts ICO to Hong Kong public
According to the news and announcement published by the Hong Kong Securities Futures Commission (SFC) on 19 March 2018, SFC has taken regulatory action against ICO issuer Black Cell Technology Limited (Black Cell) as SFC considered the ICO arrangement of Black Cell may constitute a Collective Investment Scheme (CIS).
Where an ICO involves an offer to the Hong Kong public to acquire an interest or participate in a CIS, prior authorization or licensing requirements under the SFO may be triggered unless an exemption applies. An interest in a CIS is regarded as "securities" as defined in the SFO.
SFC found that Black Cell had promoted an ICO to sell digital tokens “KROPS, through the website www.mykrops.com accessible by the Hong Kong public, with the pitch that the ICO proceeds would be used to fund the development of a mobile application and holders of the tokens would be eligible to redeem equity shares of Black Cell.
In addressing SFC’s regulatory concerns, Black Cell has undertaken not to devise, set up or market any scheme that constitutes a Collective Investment Scheme (CIS) unless in compliance with the relevant requirements under the Securities and Futures Ordinance (SFO).
Black Cell has then halted its ICO to the Hong Kong public and agreed to unwind ICO transactions for Hong Kong investors by returning them the relevant tokens following regulatory action SFC over the concerns that Black Cell had engaged in potential unauthorized promotional activities and unlicensed regulated activities.
Parties engaging in ICO activities are therefore reminded to seek legal or other professional advice if they are in doubt about the applicable legal and regulatory requirements. Investors are again reminded to exercise caution before participating in ICO.
For legal advice or services on cryptocurrency & blockchain matters, please contact CHOW & CHEUNG, Hong Kong solicitors & notaries [cac@ccsn.hk]
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