Ethereum’s Legal Game Changer: The Mysterious ‘Paper’

A series of provocative posts on X (formerly Twitter), from Ethereum advisor Steven Nerayoff has stirred speculation about potential legal improprieties in Ethereum’s early days. Nerayoff vaguely accused Ethereum co-founders Vitalik Buterin and Joseph Lubin of regulatory transgressions regarding the project’s 2014 initial coin offering (ICO).

The posts reference a mysterious “piece of paper” that Lubin claims provided legal clearance for the Ethereum ICO, which raised over $18 million. While the document’s nature remains unknown, lawyer Bill Morgan theorized it could be a “no-action” letter from the Securities and Exchange Commission (SEC) exempting Ethereum from securities laws.

The same guys who wrote this article “Is Bitcoin a Security” in 2015 who he is suggesting authored in 2014 the piece of paper in Lubin’s pocket that Lubin brags about, so it’s not some no action letter from the SEC that early before the Hinman speech so may be some free pass for… https://t.co/eQRQT0QbQu

— bill morgan (@Belisarius2020) September 27, 2023

However, in a follow-up tweet, Morgan suggests the letter may not have come from the SEC but rather, from a legal opinion crafted internally by some of the same lawyers who co-authored a 2015 article titled “Is Bitcoin a Security?” This raises doubts about whether Ethereum improperly shielded itself from securities regulations during the 2014 ICO.

In another tweet, Morgan raises the question – what if Ethereum received not one but two SEC free passes? Potentially, one in 2014 connected to the ICO, and another with the 2018 Hinman speech blessing all prior ETH sales. This further adds to the confusion about what exactly is in Lubin’s mysterious ‘piece of paper.’

If confirmed, special treatment from the SEC would have potentially enabled Ethereum to skip the registration of its ICO as a securities offering, which contrasts with Lubin’s assertion that they adhered to all guidelines. Being categorized as an unregistered security could pose a risk to Ethereum’s legal status and make it susceptible to penalties. Nevertheless, experts suggest that any alleged violations may be beyond the statute of limitations.

The SEC has not officially confirmed the existence of a ‘no-action’ letter granting an exemption to Ethereum’s ICO. Unless definitively disproven, this controversy is likely to persist, further contributing to the legal scrutiny surrounding Ethereum’s upcoming transition.

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