Friend.tech Renames Its Token—But Is It Even Legal? Regulatory red flags likely prompted the red-hot social crypto app to drop the term “shares.”
Three months after a largely unnoticed pivot, the social token platform Friend.tech is now the belle of the crypto ball, surfing a wave of popularity that has sucked in celebrities and surprised its creators. Its rapid rise has some calling it a Ponzi scheme. And late Monday, the app experienced an internal identity crisis, announcing that it was changing the name of its core asset, "Shares."
“We've renamed Shares to Keys,” Friend.tech posted on Twitter. “The original name was a placeholder during development, and we think Keys better illustrates their purpose as in-app items used to unlock your friends' chatrooms.”
Staying off the radar of a certain SEC chair may have also played a part in the decision to change the name. Well on his way down a well-worn warpath against the cryptocurrency industry, Gary Gensler has labeled many digital assets as securities, and by calling their asset “Shares,” Friend.tech could have found itself in his crosshairs.
“My legal alarm bells went off when I saw that the tokens were called 'shares,'” Orlando Cosme, founder and managing attorney at OC Advisory, told Decrypt on Telegram. “The reason for this is that an element of the Howey test is a reasonable expectation of profits.
The Howey test is used in the United States to determine whether a transaction qualifies as the sale of an "investment contract" and would be considered a security under the Securities Act of 1933. That prong of the Howey test is all about marketing and economic structure, Cosme explained, things that influence how a purchaser could reasonably believe that their purchase could provide them with a financial return. If a transaction passes the Howey Test, it is subject to securities regulations in the U.S.
Its rapid rise has some calling it a Ponzi scheme.
And late Monday, the app experienced an internal identity crisis, announcing that it was changing the name of its core asset, "Shares."
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