Security status and fraud are separate questions
Whether a token is a security usually depends on the investment contract test courts have applied for decades, which looks at how the token was sold and what buyers were led to expect rather than what it was called. Federal policy toward digital asset securities has changed sharply in recent years and continues to move, so the current position of the SEC and other agencies should be checked for any particular matter. Fraud is a different question. Prosecutors can bring wire fraud charges over false statements in a token sale whether or not the token is a security, and private investors can sue under state law. A change in registration policy does not erase allegations that investors were deceived.
What tends to be at issue in an ICO fraud defense
Cases often focus on the white paper, the website, social media posts, and messages in community channels, comparing what was said about the team, the technology, the use of proceeds, and the token's prospects with what actually happened. Insider sales, undisclosed token allocations, and paid promotion by influencers draw particular attention. A project that failed or a token that lost value is not fraud by itself; the dispute is usually about whether statements were knowingly false or misleading when made. New York's Attorney General has broad authority under the state's securities law, which does not require proof of intent in civil cases, and the Department of Financial Services licenses virtual currency businesses operating in the state.
Preserving the record and planning a response
Preserve chat histories, wallet records, smart contract code and deployment history, team communications, and records of where raised funds went, including exchanges and custodians. Blockchain data is public, and investigators often trace funds independently, so any account you give should match what the ledger shows. Do not move treasury assets or delete channels after learning of an inquiry. Founders, developers, and promoters may have different exposure and may need separate counsel. Our first review covers who is asking, which statements are at issue, and how the token was distributed and sold.
