Has the Cryptocoin Market Met Its Match in the SEC?

Regulators looking into potentially widespread violations in cryptocurrency markets have taken a bite out of the once-soaring investor demand for token deals.

While the pace of new proposed initial coin offerings has remained near record levels, there has been a marked deceleration in the amount of money being raised and a change in the source of the capital being provided.

More than 180 coin offerings are expected to launch in March, according to an estimate from research firm Token Report. That would exceed January’s total of 175 and fall only a bit below February’s 197 offerings. But the March projects are expected to raise only $795 million, a 45% decline from February’s $1.44 billion.

March’s ICO tally, which would be the lowest since August, would be the first data to reflect the state of the booming sector after The Wall Street Journal reported that the Securities and Exchange Commission had sent out dozens of subpoenas and information requests questioning whether investors were being harmed in the lightly regulated market.

Among other claims, the regulators are probing whether companies and key advisers have breached rules that govern how middlemen such as brokers sell investments to the public, according to people familiar with the matter.

In recent months, the SEC has sent at least 80 subpoenas and requests for information to various firms involved in the ICO space. These include not only the firms that are creating the new tokens, like Overstock.com Inc . ’s tZero, but firms that operate as advisers and investors as well. SEC Enforcement Director Stephanie Avakian confirmed at a conference last week that the regulator has “dozens” of investigations related to cryptocurrencies under way.

The SEC is particularly concerned about misconduct related to ICOs that haven’t raised as much money as the top 20 in the market, said Melissa Hodgman, an associate director in the SEC’s enforcement division. “The minute we go beyond that we start to see problems in one way or another,” Ms. Hodgman told the SEC’s investor advisory committee earlier this month.

Despite the March slowdown in completed deals, the first quarter is still on pace for roughly $3.6 billion in ICO fundraising, according to Token Report, which would be more than half of the $6.6 billion raised in 2017.

Another change: more ICOs are limiting their sales to institutions and millionaires, which allows them to avoid most SEC requirements.

In the first quarter, there was a marked increase in how much capital is being raised in what is called a “pre-sale” phase, when firms offer tokens to a small coterie of inside and accredited investors. In the fourth quarter of 2017, such private sales comprised about 15% of total sales, Token Report said. In the first quarter of 2018, that rose to about 24%.

Coin offerings have been marketed as something between a tech-savvy crowdfunding and an early-stage venture capital round. Some deals are structured to avoid SEC regulation and instead emphasize the access or technological utility that comes from owning the token.

Still, some of the sales could be problematic. The SEC’s probes include requests for copies of agreements that spell out financial arrangements between businesses and people who help launch the initial coin offerings, one of the people said. The SEC’s concern is that firms have compensated vendors with a percentage of tokens offered or funds they raised, which would ordinarily require them to register as brokers.

The SEC often looks for signs of “transaction-based compensation”— commissions, bonuses, or other payments based on the value of assets raised—in deals that may evade the securities laws. That pattern is just one of the possible claims the SEC is investigating as part of a broad sweep of how ICOs are structured and sold to the public.

Jay Clayton, chairman of the U.S. Securities and Exchange Commission. Photo: Andrew Harrer/Bloomberg News

SEC Chairman Jay Clayton has warned that “gatekeepers” such as brokers, lawyers and accountants could be swept into the regulatory dragnet if they don’t hew to the same laws that apply to stock and bond sales when raising funds through ICOs.

“They did give a warning to the market, but I don’t think most people focused on it,” said Kenneth Herzinger, a partner at Orrick, Herrington & Sutcliffe LLP and a former SEC enforcement lawyer. “They are looking at actors and entities beyond just ICO issuers.”

The SEC has so far brought a handful of enforcement actions alleging cryptocurrency frauds, as officials have raced to keep pace with token sales in the past 18 months. Many of the cryptocurrency-related subpoenas were issued in recent weeks, likely paving the way for what lawyers and industry insiders expect to be a wave of lawsuits or settlements.

In a securities filing on March 1, online retailer Overstock.com disclosed that the SEC requested information about the ICO of its cryptocurrency-focused subsidiary, in February. The company said in the filing that it is complying with the investigation.

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As bitcoin has emerged from the underground world of nerds and criminals to become a mainstream investment, the risk of hacks and scandals has also blossomed. What’s a government to do? The WSJ’s Steven Russolillo travels the world (sort of) to see how regulators are responding to the remarkable rise of cryptocurrencies. Video: Sharon Shi and Crystal Tai

—Maureen Farrell contributed to this article.

Appeared in the March 21, 2018, print edition as ‘Regulatory Scrutiny Deflates Coin Deals.’

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CMBS Delinquencies Continue Their Steady Fall In February

Fitch Ratings’ headquarters in New York City

NEW YORK–It is telling that the largest new CMBS delinquency in February was a $26.9 million Studio Green Apartments loan, secured by a 1,074-bed student housing property located in Newark, DE. And the largest resolution was a $90 million Wells Fargo Place loan secured by a 656,000 square foot office property in St. Paul, MN. Relatively speaking, these are small amounts.

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Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She’s a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.

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The Latest: Australia, E Timor sign pact on maritime border

The latest on peace treaty between Australia and East Timor setting maritime border (all times local):

7:05 p.m.

Australia and East Timor have signed a historic treaty drawing their maritime boundary, ending years of bitter wrangling over billions of dollars of oil and gas riches that lie beneath the Timor Sea and opening a new chapter in relations.

The agreement was doubly historic because it also marked the successful conclusion of the first-ever negotiations to settle maritime differences under the U.N. Convention on the Law of the Sea.

Before a crowd of cameras, diplomats and officials, Australia’s Foreign Minister Julie Bishop and East Timor minister Hermenegildo Augusto Cabral Pereira signed two copies of the treaty Tuesday night. The chairman of the Conciliation Commission, Danish Ambassador Peter Taksoe-Jensen, then signed as a witness.

Bishop said that under the treaty, revenue from exploiting the sea’s natural resources will be split either 80-20 or 70-30, with the lions share going to impoverished East Timor.

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Required Reading

A skyscraper in Hawaii will include a vertigo-inducing swimming pool, allowing brave swimmers to look down through its transparent base. (via Dezeen)

This list of complaints is meant to argue that literary criticism should be critical just for the sake of it, giving an unflinching excoriation of a book’s content or a cold-eyed assessment of what it lacks. Hardwick herself underscored this when she pointed a finger at the “torpor,” the “faint dissension” and “minimal style” that had infected the book review in her time. What’s new is that this faint style has developed a politics or an ethics that gives non-judgment in the book review a high-minded justification. Per its pronouncements, all reviewers (and readers) must check their biases and privilege prior to engaging with a text.

Designed by Natalie de Blois and Gordon Bunshaft of SOM and completed in 1961, 270 Park Avenue in Manhattan may become the tallest building ever to be demolished:

Union Carbide will become the tallest structure ever demolished by peaceful means, grabbing that mournful title from the 1908 Singer Building, which came down in 1968. The de Blasio administration is cheering: last year’s East Midtown upzoning was intended to produce just such behemoths. The multibillion-dollar project will throw off about $40 million to improve streets and subway stations, and rack up thousands of construction and office jobs. It’s true that Park Avenue between 47th and 48th Street is as fine a spot for a supertall tower as any in Manhattan. Given that One Vanderbilt, now under construction, is heading for 1,400 feet, the next JPMorgan Chase tower seems positively stumpy. Unfortunately, a building stands in the way of this glorious future, and this one is special.

Artist Neïl Beloufa removed an image of artist Parker Bright from an exhibition in Paris after Bright was vocal about being against the decision to include his image (without his permission). Alex Greenberger reports:

The mirror object that includes Bright’s image was “not an artwork,” according to Beloufa and Désanges. It was not for sale, they said, and though it was contextualized within the project by information about Bright’s action at the Whitney Biennial, it was one of several images, texts, and ideas “reproduced, mostly without permission.” They wrote, “Sorry, we should have talked to you. And it is too late. . . . It was part of the accumulation of medias, informations, documentations and reproductions we’ve put together to open the conversation about the complexity of the relation between art form and power representation—about domination strategies and counter strategies from every field and country.” They added that the process of sourcing their material is inevitably “problematic and bound to fail.”

In an email to ARTnews, Bright confirmed that he had received Beloufa and Désanges’s email, but said that it was not clear enough which parts of the work were removed and that Beloufa’s use of his image was not dissimilar to the way Schutz used Till’s image as “raw material.” “From the message that Beloufa sent me this morning, I find it very peculiar that his work inside of an art institution, under the scope of the work being a part of an art exhibition, is ‘not art,’ according to Beloufa,” Bright said in an email yesterday. “I find that to be a huge contradiction that negates any accountability. If the work is not an ‘artwork,’ then what is it, then?”

MIT Technology Review makes a prediction about 10 technologies that will make a mark in 2018, including:

Babel-fish earbuds

Google’s Pixel Buds show the promise of real-time translation, though the current hardware is unreliable.

Early archaeologists working to answer the question of who built the mounds attributed them to the Toltecs, Vikings, Welshmen, Hindus, and many others. It seemed that any group—other than the American Indian—could serve as the likely architects of the great earthworks. The impact of this narrative led to some of early America’s most rigorous archaeology, as the quest to determine where these mounds came from became salacious conversation pieces for America’s middle and upper classes. The Ohio earthworks, such as Newark Earthworks, a National Historic Landmark located just outside Newark, OH, for example, were thought by John Fitch (builder of America’s first steam-powered boat in 1785) to be military-style fortifications. This contributed to the notion that, prior to the Native American, highly skilled warriors of unknown origin had populated the North American continent.

The new Obama portraits have helped attendance numbers at the Smithsonian’s National Portrait Gallery:

According to author Wael Fathi, this is far from the only allusion to queerness in Ancient Egyptian culture. For other examples, he cites the Egyptian Book of the Dead, written in 970 BCE (not to be confused with the Tibetan Book of the Dead, written sometime in the 8th century CE). Its female author writes, “I never had sex with a woman in the temple.” Who knew so much suggestion could be packed into the phrase “in the temple.” There are also numerous allusions to same-sex sexual activity and gender bending among the tales of Egyptian gods. And in the Book of Dreams (circa 1200 BCE), different fates are laid out for the woman who has sex with a married woman versus the one who has sex with a single woman.

This week, President Trump has been suggesting that teacher be armed, and filmmaker Michael Moore tweeted this today (is this really where things are going?):

Not just teachers! Arm the the LunchLady & that guy who does the morning announcements over the intercom (have him fire off a round just 2 show he means business). Bring back driver ed, civics & handwriting & arm them. Arm the marching band! If they can march, they can shoot! pic.twitter.com/BoYw4J33uc

— Michael Moore (@MMFlint) February 25, 2018

No joke, this is the worst roommate story you’ll ever read:

On the day in 2015 when he faced off against Jill Weatherford, a South Carolina Realtor whose tenants had taken him in, he showed up in a sweat-drenched suit, having walked the four miles to the courthouse in the Charleston sun. He had somehow compiled a list of her past tenants and began rattling off the names, falsely accusing Weatherford of being a slumlord. “I said, ‘I’ve never met this man in my life,’ ” Weatherford told me. “I’ve been doing this for 33 years and never seen anything like it.” When he stepped before Judge Marvin Williams in Philadelphia, to accuse Melissa Frost of destroying his property, Williams told him, “I find you to be totally incredible. I don’t believe a word you say — and, frankly, you’re frightening.”

You may want to be sitting when you read this, “Why Russia’s Facebook ads were less important to Trump’s victory than his own Facebook ads.”:

During the run-up to the election, the Trump and Clinton campaigns bid ruthlessly for the same online real estate in front of the same swing-state voters. But because Trump used provocative content to stoke social media buzz, and he was better able to drive likes, comments, and shares than Clinton, his bids received a boost from Facebook’s click model, effectively winning him more media for less money. In essence, Clinton was paying Manhattan prices for the square footage on your smartphone’s screen, while Trump was paying Detroit prices. Facebook users in swing states who felt Trump had taken over their news feeds may not have been hallucinating.

How a girl in my biology lecture found out her dad wasn’t really her dad by my prof

A thread

— Anya (@anyahettich) February 21, 2018

Required Reading is published every Sunday morning ET, and is comprised of a short list of art-related links to long-form articles, videos, blog posts, or photo essays worth a second look.

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Is Lindsey Vonn Single? Here’s What She Said!

Lindsey Vonn is currently getting ready to take the ski slopes in what she said is “likely” her final downhill ski competition at the 2018 Olympics.

A few weeks ago, Lindsey tweeted, “I’m single because I only have eyes for the Olympics❤ #whyimsingle #onetrackmind …also, where’s my pep talk coach?” in response to Jimmy Fallon asking fans to “Tweet out a funny or embarrassing reason why you’re single and tag it with #WhyImSingle.”

Back in November, Lindsey split with her boyfriend of one year, Kenan Smith.

She’s also been linked to actor Alexander Ludwig and split from her longtime boyfriend Tiger Woods in 2015.

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Feb. 19: Be The Match marrow registry

Danny Feltwell (right) joins Detective Bill Wentz on the sidelines at a UD football game.
UD Police Department to host marrow registry event inspired by Newark boy battling cancer

The University of Delaware Police Department will host a “Be The Match” marrow registry event on Feb. 19 two locations — the STAR Health Sciences Complex (540 S College Avenue, Newark, DE 19713) from 10 a.m. to 4 p.m. and Perkins Student Center (325 Academy St, Newark, DE 19716) from 12 to 4 p.m. No advance registration is required.

Be The Match runs the United States registry of volunteer stem cell/marrow donors. Marrow transplants are a cure for more than 80 diseases including leukemia, lymphoma, and autoimmune and genetic disorders such as sickle cell disease. Be The Match notes that 70 percent of patients will not have a fully matched donor in their family and will rely on the registry to find a life-saving donor.

The inspiration behind the effort is Danny Feltwell, a Newark-area boy battling T-cell lymphoblastic lymphoma — a rare and very aggressive non-Hodgkin’s lymphoma. Danny became close with UD Detective Bill Wentz after getting to know him at UD football games. The Delaware native has undergone treatment off and on since 2012. He’s currently in Alfred I. duPont Hospital for Children receiving chemotherapy. Wentz has personally rallied local support for Danny and the Feltwell family, and is the driving force behind the Feb. 19 event.

“It is my hope and Danny’s wish that many people come out to take part in this event. Danny and his family want to help everyone affected by cancer,” said Wentz. “Participating in this event can truly make a difference. Not only is there a chance to save Danny, but there is an opportunity to save many other lives.”

Joining the registry

The event is open and free to the UD students, UD employees and the general public ages 18 to 44 who are willing to donate to any patient in need (not just Danny) and meet the medical guidelines. There is no charge for those 18- to 44-year-old to join because Be The Match covers the cost. Individuals ages 45 to 60 are unable to register in person at the event; however, they may join online via a code set up in Danny’s honor. A registration fee of $100 is required to cover the cost of the testing. Be The Match focuses its funding on the 18 to 44 age group because 98 percent of donor matches come from that group.

The process of joining the registry takes 15 minutes and includes paperwork and a painless cheek swab — no needles or blood. Potential donors are listed on the Be The Match Registry until the age of 61. It is voluntary and a person can remove their name at any time.

One in 430 people will go on to donate to a patient in need. Donors never pay to donate; all costs are covered. If you’d like to register, but are unable to attend the registration event, please register via Danny’s link. A swab kit will be mailed to you in a prepaid return envelope.

Donor myths and truths

“Myths regarding the donation process prevent many people from joining in the first place,” said Aimee Haskew, Be The Match Community Engagement Representative, Mid-Atlantic Region. “Many people believe the myths perpetuated by TV and movies that donating is incredibly painful with a long recovery time.”

In truth, most donors donate blood stem cells in a procedure similar to a platelet or plasma donation. Marrow donation is still done about 20 percent of the time, but is completed with the donor under general anesthesia. Most donors are back to school or work within a day or two of donating.

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Amazon picks 20 finalists for its second headquarters

These are the bids Amazon didn’t choose for HQ2
Amazon has released a "short" list of cities it’s considering for its second headquarters.

The 20 potential cities are Atlanta; Austin; Boston; Chicago; Columbus, Ohio; Dallas; Denver; Indianapolis; Los Angeles; Miami; Montgomery County, Maryland; Nashville; Newark; New York City; Northern Virginia; Philadelphia; Pittsburgh; Raleigh; Toronto and Washington, D.C.

Last year, Amazon (AMZN) received bids from 238 cities and regions from across 54 states, provinces, districts and territories across North America. The company said it would make a decision in 2018.

Called HQ2, the new facility will cost at least $5 billion to construct and operate, and will create as many as 50,000 high-paying jobs.

"Getting from 238 to 20 was very tough – all the proposals showed tremendous enthusiasm and creativity," Holly Sullivan of Amazon Public Policy said in a statement. "Through this process we learned about many new communities across North America that we will consider as locations for future infrastructure investment and job creation."

Amazon said Thursday that it evaluated each of the bids based on the criteria it previously outlined, such as proximity to a major airport, ability to attract tech talent and a suburban or urban area with more than 1 million people.

In the coming months, the company said, it will work with each of the locations to "dive deeper" into their proposals, obtain more information and evaluate how the city could accommodate Amazon’s hiring plans and benefit its workers and the local community.

Toronto, a growing tech hub, was the only city outside the U.S. on the list. Toronto recently announced a partnership with Sidewalk Labs, an urban innovation company owned by Google’s parent company Alphabet, to build a futuristic neighborhood. (The neighborhood’s transportation will be prioritized around walking, cycling and shared electric vehicles, and there will be a greater effort around reducing pollution, commute times and improving the weather.)

Colin Sebastian, an analyst at investment bank Baird, said he is surprised that cities without major airport hubs — such as Columbus and Nashville — are on the list, considering that was one of Amazon’s main asks.

"Otherwise, there are not too many surprises here," he told CNN Tech. "However, I’m a bit surprised Houston, Detroit and Minneapolis are not on the list. Their proposals may have simply fallen short."

Some cities which were considered top contenders made the list. Atlanta was the number one pick of gambling site Paddy Power and Sperling’s BestPlaces. Moody’s listed Atlanta second behind Austin, Texas. Experts say Atlanta’s cost of living, talent pool and access to the world’s busiest airport make it an attractive option. But one major downside is traffic congestion.

Austin, which is also home to Amazon-owned Whole Foods, is also a solid contender. The city already has a booming tech sector and giants like Apple, Google, Facebook and Microsoft have offices there. Meanwhile, there are 425,000 college students in the region, according to the Austin Chamber of Commerce, which would give Amazon a strong base for recruiting new employees.

Three locations in the Washington D.C. metro area made the list. Real estate group CBRE previously ranked Washington D.C. among the top five cities in the U.S. with tech talent. In addition, an Amazon headquarters near the federal government could give it a chance to build better connection with national leaders.

Most cities have stayed quiet about the tax breaks they’re offering, but Newark and the state of New Jersey are collectively offering tax incentives of up to $7 billion.

Los Angeles was the only West Coast city that made the list. Considering Amazon’s headquarters is located not too far away in Seattle, the move to focus elsewhere was expected.

Some cities that didn’t make the cut made splashy attempts to attract the company’s attention. Tucson, Arizona sent a giant cactus to Amazon CEO Jeff Bezos, and Kansas City Mayor Sly James gave five-star reviews to 1,000 random items on Amazon’s website — tying the city’s strengths into each post.

Stonecrest, Georgia, which offered to de-annex some of its land and rename it the city of Amazon, is still in the running as part of Atlanta’s efforts.

Amazon has said the second headquarters would be a "full equal" to its Seattle campus. The tech giant estimates its investments in Seattle from 2010 through 2016 resulted in an extra $38 billion to the city’s economy.

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Can The Guy Who Helped Waste Millions In Newark Help Save NYC Public Housing?

Approximately 400,000 people live in NYC’s public housing system, struggling to make their homes in crime-ridden developments with often squalid conditions. The New York City Housing Authority (NYCHA) needs billions just to maintain its already poor conditions. So why is NYCHA’s new Vice President of Development a guy who was involved with wasting millions of tax dollars on a boondoggle in Newark, New Jersey?

Read more “Can The Guy Who Helped Waste Millions In Newark Help Save NYC Public Housing?”

Newark Housing Information That You Can Access

Do you need to find information on houses in Newark? If you are moving there because of a job, or if you simply want to retire in New Jersey, this is a great city to choose. It is a nice location, located on the East Coast, were many people enjoy living. It is one of the most populous cities in the United States, and is certainly the most populated of all of the cities in the state. Located in Essex County, located west of lower Manhattan, you really couldn’t choose a better place to be. To find housing in Newark that you might want to consider purchasing, these tips can show you how to get this information.

Read more “Newark Housing Information That You Can Access”