Should real estate’s cryptocurrency kings be worried? On Feb. 28, the Wall Street Journal reported that the U.S. Securities and Exchange Commission (SEC) had issued “dozens of subpoenas” to investigate various cryptocurrency startups that have raised money through initial coin offerings (ICOs), sales of custom digital tokens based on an existing cryptocurrency blockchain, such as ethereum.
Among those who have been targeted by the SEC is a subsidiary of the prominent online retailer Overstock.
The company, which specializes in home goods and was one of the first major retailers to accept Bitcoin as a form of currency, disclosed that it was providing “documents related to the Offering and the Tokens in connection with its investigation” in an annual 8-K filing to the government agency first uncovered by Bloomberg.
tZero, an Overstock.com subsidiary, has raised approximately $110 million after launching a token sale for a new capital exchange in September.
“tZERO has been requested to voluntarily provide information about its ICO (initial coin offering) to the SEC and is fully cooperating with that request,” an Overstock.com representative told Inman. When news of the investigation broke on the morning of March 1, company shares fell by 10 percent before recovering somewhat by the end of the day.
“Unlike many other ICO’s, tZERO’s ICO is being pursued as a security token,” the spokesperson further said. “We welcome the SEC’s spotlight in this marketplace and the efforts of the industry to start self-policing its conduct.”
The recent series of investigations is part of a larger SEC crackdown into the cryptocurrency market and ICOs. In September 2017, the agency launched a Cyber Unit to investigate the recent surge of digital currencies on the market. One crypto real estate startup, ReCoin, was already charged with fraud last October.
It remains to be seen whether the SEC’s probe will sweep in any of the other more real estate-focused cryptocurrency startups.