01 April 2018

US Corporate Law News: SEC to examine up to 100 cryptocurrency-related hedge funds

Flora Tsui
Associate | US

Following its March 2018 announcement regarding SEC registration of online platforms that trade digital assets, the SEC is set to examine up to 100 hedge funds that deal with cryptocurrencies. SEC examiners are expected to begin their examinations by May 2018 to inspect whether the crypto-related hedge funds are delivering the type of exposure that fund managers outline in their investment papers. The SEC is expected to focus on examining whether the assets bought by fund managers match those advertised to investors in disclosure documents, and on assessing the sufficiency of risk disclosures provided to investors. The SEC directly regulates managers of private funds that oversee at least $150 million in assets, and has authority to periodically inspect smaller firms. Although hedge funds are most likely to hold cryptocurrencies, the SEC may examine private equity firms if their funds own digital assets either directly or through companies linked to the cryptocurrency industry. In 2017, over 75 cryptocurrency hedge funds launched in the U.S. For more information, see https://www.wsj.com/articles/crypto-focused-hedge-funds-on-secs-radar-1521757104.

Flora Tsui Associate | New York