On the same day as his speech at the Yahoo! Finance Summit, William Hinman explains to CNBC that “when we look at ether” — ‘we’ clearly meaning the SEC — “we don’t see a third party promoter where applying the disclosure regime would make a lot of sense.” He goes on to describe securities transactions made with tokens that, in fact, closely describe the Ethereum ICO of 2014, the promotion of ether by Vitalik Buterin, Joseph Lubin and the Ethereum Foundation, and ongoing promotion by Lubin’s company, ConsenSys.
Court documents in the Ripple case and Hinman’s redacted public calendar revealed that Hinman or his advisers met exclusively with Lubin and ConsenSys seven times before Hinman gave his speech, and no promoters or developers of any other ledger or token.
Two months after the Hinman speech, SEC Chairman Jay Clayton says that “Bill Hinman recently outlined the approach we take to evaluate whether a digital asset is a security.” He adds: “I encourage you to take a look at Bill’s speech which is available on our website.”
Steven Nerayoff says that Ethereum’s lawyers told him that they had an “illegal securities offering.” He then said that he “was charged with a very simple thing. Raise money, and not go to prison.”
He also says that he described his plan to frame ether as a good to former SEC chairman Joseph Grundfest who thought it was “brilliant” and that he “spoke to some folks at the SEC who actually loved the idea and thought it made a lot of sense.” He describes this as the genesis of “the concept of a ‘utility coin’.”
Jay Clayton says that “the area [of crypto] that is of particular interest to me … is the payment system. Our payment system is inefficient. Domestically it is inefficient. Internationally it is extremely inefficient. So if we don’t work and use technology to address those inefficiencies the market is going to do it for us.” One month later, Clayton’s SEC sued the highest profile market leader providing a solution – Ripple – at a time ConsenSys was moving to directly compete with Ripple.
When asked “will there be a limit on the amount a person can invest in Ethereum” Joseph Lubin – co-founder of Ethereum – responds shortly before the ICO: “A person can buy from any number of different identities. We may limit the size the unit size of a sale just to make it easier to disguise.” For investors who “want some privacy” and are “planning on investing several million U.S. dollars worth, then you can do that in multiple identities.” Lubin assures that Ethereum “won’t be requiring” a “real world identity” for sales of ether. “We can create a pseudonymous email and identity on purchasing,” he pledges.
For whales, anyone “planning on investing several million U.S. dollars’ worth,” Lubin recommends to “do that in multiple identities” and says that “we will ask for real world identity in the form of an email address just so that we can make sure that everything works smooth.”
In describing the upcoming initial coin offering (ICO) for Ethereum, Vitalik Buterin insisted it would be “an opportunity for anyone to purchase ether” which he said was a “currency inside the Ethereum system, sort of like the XRP in Ripple.”
Joel Dietz, co-founder of Ethereum, leads a pre-launch presentation on Ethereum, specifically on the “technology and then organizationally, including this IPO.” Dietz goes on to describe the legal structure of Ethereum as “up in the air” but that it “is going to have a few different non-profits who are established in different parts of the world.” He then describes the fundraising as “crowd equity funding” and says that there “would not be a cap on per person [purchasing]” and that there “is no way to know who is contributing.” Later on in the presentation, Ethereum founder Vitalik Buterin admits “the SEC is a tough thing” and that “we do have to be careful” when talking about the “Ethereum IPO”.
Then-former CFTC Chairman Gary Gensler says there is not regulatory clarity in the digital asset markets, and “for Ripple” there “needs to be clarity in the market.” He then scoffs that “a group of venture capitalists that went in to the SEC” and how “they’re sort of saying – believe us, we get you, we’re with you, SEC – but we have a bunch of clients who are going to evolve to be a consumable token … I kind of don’t think this is going to work.” Gensler concludes by saying that “the market needs clarity” and that “the uncertainty as to whether ether is or is not a security… it could exist for months but at some point in time it is worthwhile to settle that down or have it fall into the courts.”
Valerie A. Szczepanik, the Senior Advisor for Digital Assets and Innovation and an Associate Director in the SEC’s Division of Corporation Finance, stammers through claiming that “we’re [the SEC] trying not to regulate in a way that has picking winners and losers in technology” and that “we’re trying to be technology neutral.”