Altcoins
SEC Takes Aim at Altcoins, Labels MATIC, LUNC, CHZ as Securities
- The SEC has targeted several altcoins, including Polygon (MATIC), Terra Luna Classic (LUNC), The Sandbox (SAND), Decentraland (MANA), and Chiliz (CHZ), for being offered as unregistered investment contracts tied to their businesses.
- On-chain data also shows that address activity for three altcoins Render (RNDR), Aave (AAVE), and Maker (MKR) is showing a bullish structure going forward..
According to a leaked court document, the United States Securities and Exchange Commission (SEC) has shared the reasons behind its decision to crack down on several altcoins, including Polygon (MATIC), Terra Luna Classic (LUNC), The Sandbox (SAND), Decentraland (MANA), and Chiliz (CHZ).
The securities regulator said that all of these altcoins were initially offered to investors as investment contracts tied to their affiliated businesses. Through its review, the U.S. SEC highlighted an incident from April 2021, when Polygon Labs sold 19% of its MATIC supply and, in turn, raised $5 million through the sale of unregistered securities on Binance via an Initial Exchange Offering (IEO).
Polygon Labs sold each of the MATIC tokens at a price of $0.00263, stating that the expected proceeds would go towards blockchain development.
A similar scenario concerns CHZ, a sports-focused blockchain platform that features over 100 officially licensed crypto tokens tied to major sports franchises. Referring to Chiliz’s whitepaper, the SEC detailed CHZ’s tokenomics, specifically highlighting a 58% allocation to operating expenses.
LUNA was a part of Terraform Labs capital
The Terra Luna Classic court filing outlines Terraform Lab’s communication regarding the original LUNA token as representing the company’s equity. According to the SEC, the 2018 LUNA token sale agreement explicitly stated that the funds raised were for Terraform’s development and operation of systems.
LUNC’s role in the SEC case may vary. The SEC recently finalized a significant $4.5 billion settlement with TerraForm Labs, the parent company of LUNA, and other tokens named in the lawsuits.
Following Terraform Labs’ bankruptcy proceedings earlier this year, it is likely that LUNC and USTC tokens will exit circulation this year, as these assets may be liquidated to cover the $4.5 billion fine imposed by U.S. financial regulators.
Altcoins currently under the radar
On-chain data provider Santiment has reported a sharp increase in address activity for three major altcoins: Render (RNDR), Aave (AAVE), and Maker (MKR) over the past few days. Historically, there has been an increase in the number of wallets interacting on these networks along with a strong indicator of future bullish behavior. Santiment expects positive trends for these altcoins soon.
Courtesy: Santiment
Furthermore, Santiment also stated that altcoins such as Litecoin (LTC) and XRP are experiencing FOMO as the cryptocurrency market continues its strong rebound. While these coins have the potential to continue to rise, the current euphoria surrounding them suggests that they could be high-risk, high-reward investments this week.
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