Subpoenas Signal S.E.C. Crackdown on Initial Coin Offerings

SAN FRANCISCO — The Securities and Exchange Commission has sent subpoenas to dozens of people and companies behind the rise of so-called initial coin offerings, a clear sign of the agency’s desire to rein in the popular new fund-raising method.

Over the last few months, the commission has asked for information from companies that have sold new virtual currencies to raise money for their projects, as well as advisory firms and lawyers who have helped with these sales, according to four people who have seen some of the subpoenas. The people asked not to be identified because the subpoenas are part of confidential legal negotiations.

The demands for information began last year, and companies have continued receiving them in recent months, the four people said.

Nick Morgan, a former lawyer in the S.E.C.’s enforcement division, said that according to his contacts in the industry, the subpoenas had gone out to as many as 80 companies and individuals. Mr. Morgan, who is now a lawyer at the Paul Hastings firm, said those numbers would make this one of the broader regulatory sweeps he had seen.

The S.E.C. had no comment on the subpoenas, which were first reported on Wednesday by The Wall Street Journal.

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Coin offerings are a way for start-ups or online projects to raise money without selling stock or going to venture capitalists. The money is raised by creating and selling a virtual currency, generally with rules similar to well-known virtual currencies like Bitcoin.

The demands for information are the most concrete sign of the S.E.C.’s intention to crack down on the sudden emergence of coin offerings. Companies raised over $5 billion through coin offerings in 2017, according to the news and data site Coindesk.

Jay Clayton, the chairman of the S.E.C., has said on several occasions that most of the virtual currencies that have been sold should have been categorized as securities and registered with regulators, which few companies have done.

Companies have been able to get around regulatory checks because they have collected the money in Bitcoin and other virtual currencies, which can be sent without going through any banks or other middlemen that might look into the legality of the transactions.

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