Securities and Exchange Commission Chairman Jay Clayton told FOX Business in an exclusive interview that investors should “think long and hard” before jumping into an initial coin offering, also known as an ICO. His warning comes as Telegram, an encrypted messaging app company, has broken the record for the biggest ICO campaign of all time. The company has raised more than $850 million in the first two months of fundraising – out of what is expected to be a $2 billion ICO.

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An initial coin offering is similar to an initial public offering for a company but investors buy crypto tokens or coins instead of stock.

“I worry in particular about people who see things that look like a New York Stock Exchange or NASDAQ listing for ICOs or cryptocurrencies and think that I’m getting the same protection for my token that I would be getting for a share of stock that trades on an exchange,” Clayton said. “They’re not.”

The chairman and his team are examining whether a number of ICOs are violating securities laws, telling FOX Business: “Many ICOs and many of the ones I’ve looked at specifically are securities. … For some reason, people selling ICOs seem to think they don’t need to follow either path; they seem to think they can have the best of both worlds: a limited disclosure from a private placement and public trading and public offering of the token.”

Clayton is also concerned about how ICOs raise capital. “We have seen instances where companies seem to have had trouble raising money in a traditional private placement and then have switched to an ICO in order to raise the money,” he said. “The business hasn’t changed substantively, but it’s a form-over-substance way to raise money. That is troubling”.

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The chairman, who was nominated by President Donald Trump, took the helm as Wall Street’s top cop in May 2017, just as cryptocurrencies were gaining momentum. Today, bitcoin is trading at about $10,000, up from about $1,000 last May.

While Clayton balances regulating the world of cryptocurrencies with legitimate growth, he acknowledges that this asset class is likely here to stay and therefore wants an open dialogue with the companies leading the space.

“It’s important to understand that the fundamentals of our securities laws do apply in this space,” Clayton said. “It’s a technology with great promise. … It’s a technology that I really think is pretty cool and can change the way people do business at a great deal of efficiency, but it doesn’t mean that you can obviate our tried-and-true approach to the federal securities laws”.

Anyone or any company that tries to skirt the rules will be dealt with by the SEC. “Abide by the law,” Clayton warned. “We are watching. Others are watching.”