SEC Investigation Into The DAOs Initial Cryptocurrency Offering– On July 25, 2017, the SEC issued its Report on an investigation into an ICO and related activities by the DAO, an unincorporated entity, Slock.it UG, a German corporation, and various principals and participants. Although the report provides a platform for which the SEC can educate the marketplace, it did not pursue enforcement actions against the targets of the investigation.
The “DAO” stands for a decentralized autonomous organization, or a virtual network embodied in computer code on a DLT or blockchain. The DAO was created by Slock.it to sell tokens to investors, which proceeds would be used to fund for-profit projects. The token holders would share in the profits and, as such, had an expectation of a return on investment. The DAO tokens were also transferable and available for secondary trading on different web-based platforms. After the ICO, but before projects were funded, the DAO was hacked and approximately one-third of its assets stolen. Fortunately the DAO was able to come up with a plan that caused the return of ETGH raised from the DAO back to their original Ethereum address and thus return investments to the original investors…