Overstock has disclosed that US regulators are probing the $250 million tZero initial coin offering (ICO) for potential violations of federal securities laws.
The e-commerce company, which has acquired a growing portfolio of blockchain startups over the past few years, made this disclosure in a document dated March 1 and filed with the SEC.
The filing stated that the SEC’s enforcement division contacted Overstock in February and asked them to voluntarily hand over documents related to the structure of the tZero ICO. The company said that it is currently in the process of responding to this request and intends to cooperate with the agency during the investigation.
From the filing:
“While the SEC is trying to determine whether there have been any violations of the federal securities laws, the investigation does not mean that the SEC has concluded that anyone has violated the law. Also, the investigation does not mean that the SEC has a negative opinion of any person, entity, or security.”
On Wednesday an explosive Wall Street Journal report revealed that the SEC had sent subpoenas to “scores” of ICO operators in a broad probe aimed at policing the nascent ICO fundraising industry, which regulators allege has been used to circumvent federal regulations.
The report stated that the SEC is eyeing simple agreements for futures tokens (SAFTs) with particular scrutiny, as it believes these token sale contribution agreements have been used to illegally bypass laws governing securities trading.
Overstock has conducted the tZero ICO under a simple agreement for future equity (SAFE) — the investment instrument from which the SAFT was derived — aiming to raise $250 million to develop an SEC- and FINRA-compliant security token exchange.
The company has said that tokens will bear characteristics of both a utility and a security, as investors can either use them to receive discounts on platform trading fees or hold them to receive a portion of tZero’s profits.
Notably, the filing, which replaces the original offering memorandum the company had distributed in December, gives prior investors the option to rescind their SAFE and receive a full refund, though they have just five business days to execute their withdrawal rights.
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Last modified: June 11, 2020 10:08 AM UTC