The company behind the promising EOS blockchain network has once again become the target of legal action by unhappy investors. Block.One, the financial technology startup that launched an initial coin offering for the purpose of funding EOS, is now acing two class-action lawsuits after raising $4 billion over twelve months; the most recent legal complaint was filed in the Southern District of New York on May 18 while the first one was filed a month ago in the same venue.

In essence, the plaintiffs are American investors who purchase EOS tokens through the ICO, a funding method the the United States Securities and Exchange Commission has deemed to be unlawful because it deals with unregistered investment securities. The EOS token is one of many to have launched through the lucrative ICO method, but they have all resulted in the same assessment by the SEC. The problem lies in allowing American investors to participate in ICO rounds, but fintech companies know that the U.S. is a market that should not be ignored.

ICOs have been compared to crowdfunding efforts, but the SEC insists that they are sales of investment securities similar to initial public offerings, which means that digital currency tokens should be required to register as securities. To make matters worse, the SEC has yet to approve a single application for exchange-traded funds (ETFs) based on Bitcoin or other cryptocurrencies, so there is little hope for these fintech startups to list shares of their companies on the New York Stock Exchange or the Nasdaq.

Block.One has an office in the state of Virginia, but its headquarters are registered in the Cayman Islands. The lawsuit alleges that American investors were assured that the SEC would not consider EOS an investment security. In September 2019, the SEC issued a cease-and-desist order against Block.One after a determination that EOS tokens met the U.S. criteria of unregistered securities. This is a problem that many cryptocurrency developers keep running into, which is why many law firms and market analysts recommend launching ICOs in jurisdictions outside of the U.S.; moreover, American citizens should not be allowed to participate.