On Tuesday, the US Securities and Exchange Commission (SEC) released a warning on initial exchange offerings (IEOs).

As the notice says, IEOs are pretty much the same as initial coin offerings (ICOs). However, the agency has investigated many to be unregistered securities offerings, especially in the last few years. Whereas providers of IEOs say their sales differ from ICOs, they still may be in violation of the federal securities laws, SEC mentions. For this reason, the agency has told investors to be very careful if they’re thinking about investing in IEOs. This is what the notice says exactly:

“IEOs are being touted as an innovation on ICOs because they are offered directly by online trading platforms on behalf of companies – usually for a fee – to provide immediate trading opportunities for the digital assets.”

SEC also says in the note that crypto exchanges aren’t typically registered with the agency, so they improperly call themselves exchanges. It warned that platforms may say they’re registered, but this doesn’t mean they actually are, not to mention IEO’s approved by the SEC don’t exist. It continued with:

“It is common for a fraudster to make false and misleading statements or exaggerated claims about regulatory approvals and oversight to lure potential investors. It pays to independently investigate these claims for yourself.”

According to the agency, investing in an IEO conducted by an offshore trading platform is risky because companies that decide to run their business offshore usually attempt to avoid regulations. More than this, it can be difficult to discover important information about them.

The note mentions in the end that US courts can’t offer legal remedies to investors who use offshore trading platforms to be issued IEOs. While cases may be won in courts, US judgment can’t be collected against companies, entities or persons that operate in foreign countries, so the laws in those countries are the one to be applied.

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