Could Ben.eth’s PSYOP tokens face legal scrutiny? It depends, say lawyers

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Ben.eth, the pseu­do-anony­mous meme­coin cre­ator behind at least three con­tro­ver­sial token launch­es in recent weeks could fall under the crosshair of Unit­ed States reg­u­la­tors, cryp­to lawyers suggest.

A pre­vi­ous­ly lit­tle-known per­son­al­i­ty in the cryp­to com­mu­ni­ty, Ben.eth has seen his Twit­ter fol­low­ing blow up near­ly five-fold in May. The influ­encer has launched at least three meme­coins in recent weeks — Ben Coin (BEN), PSYOP, and LOYAL.

Pre-sales of these meme­coins — which require Ether (ETH) to be sent direct­ly to the cre­ator him­self — have allowed Ben.eth to gath­er thou­sands of ETH. Cur­rent­ly, his wal­let holds 10,946 ETH, equiv­a­lent to $20.8 million.

The ETH bal­ance of the ben.eth wal­let is near­ing $21 mil­lion worth. Source: Ether­scan

While Ben.eth’s sup­port­ers have defend­ed the legit­i­ma­cy of the token sales, oth­ers warn that the influencer’s actions could face the wrath of reg­u­la­tors and dis­grun­tled investors alike. 

Michael Kanovitz, a part­ner at Loevy & Loevy told Coin­tele­graph, the Psy­op launch “is a clas­sic exam­ple of the con­cerns the SEC has iden­ti­fied in actions like those against Kim Kar­dashi­an and Paul Pierce.”

Kanovitz recent­ly sent a pro­fan­i­ty-laden let­ter via NFT to Ben.eth threat­en­ing a class-action suit against him alleg­ing he “used a manip­u­la­tive launch strat­e­gy” in the PSYOP presale.

Kanovitz alleged Ben promised Psy­op’s returns on invest­ment would be “sev­er­al fold or greater” and claimed he “coor­di­nat­ed with oth­er influ­encers to spread mis­in­for­ma­tion” and poten­tial­ly manip­u­lat­ed the token’s price.

Point­ing to BEN and LOYAL, Kanovitz said he’s “con­tin­u­ing to gath­er evi­dence” on the alleged scheme.

In com­ments to Coin­tele­graph, Michael Baci­na, a lawyer and part­ner at Piper Alder­man said the legal trou­ble Ben could find him­self in depends on if the sales are inves­ti­gat­ed and what U.S. reg­u­la­tor car­ries out that investigation.

The Secu­ri­ties and Exchange Com­mis­sion (SEC), for exam­ple, might believe the tokens are invest­ment con­tracts — as it does with most oth­er cryp­tocur­ren­cies — and could con­sid­er them unreg­is­tered secu­ri­ties which could see Ben face pos­si­ble fines and penalties.

Coin­tele­graph has con­tact­ed Ben.eth on mul­ti­ple occa­sions but has not received a response. Coin­tele­graph con­tact­ed the SEC for gen­er­al com­ment but did not receive an imme­di­ate response.

Relat­ed: Meme­coins: From memes to multi­bil­lion-dol­lar pumps, scams and rug pulls

Ben.eth’s most recent token launch LOYAL is sup­pos­ed­ly for an in-devel­op­ment decen­tral­ized exchange (DEX) and “meme­coin launch­pad” named Psy­Dex, a pur­port­ed Uniswap com­peti­tor, accord­ing to col­lab­o­ra­tor Ben Armstrong. 

Mean­while, oth­er influ­encers have attempt­ed to cap­ture some of the recent meme­coin mag­ic, ask­ing fol­low­ers to send ETH for essen­tial­ly “noth­ing.”

The wal­let address “yougetnothing.eth” cur­rent­ly shows a bal­ance of 411 ETH worth $780,000 and has close to 4,000 trans­ac­tions over the last 13 hours, accord­ing to Etherscan.

Oth­er influ­encers, such as Amer­i­can socialite Kim Kar­dashi­an, have been slapped by the SEC for cryp­to pro­mo­tions. In Octo­ber, the reg­u­la­tor issued Kar­dashi­an a $1.26 mil­lion penal­ty for her involve­ment in the pro­mo­tion of Ethereum­Max (EMAX). In Feb­ru­ary, NBA play­er Paul Pierce made a sim­i­lar-sized set­tle­ment with the regulator.

Addi­tion­al report­ing by Jesse Coghlan.

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