The North American Securities Administrators Association (NASAA) has conducted one of the largest co-ordinated series of enforcement actions by state and provincial securities regulators in the United States and Canada to crack down on fraudulent Initial Coin Offerings (ICOs), cryptocurrency-related investment products, and those behind them.
NASAA members from more than 40 jurisdictions throughout North America participated in “Operation Cryptosweep,” which to date has resulted in nearly 70 inquiries and investigations and 35 pending or completed enforcement actions related to ICOs or cryptocurrencies since the beginning of May. NASAA members are conducting additional investigations into potentially fraudulent conduct that may result in additional enforcement actions. These actions are in addition to more than a dozen enforcement actions previously undertaken by NASAA members regarding these types of products. Many NASAA members also are conducting public outreach initiatives to warn investors in their jurisdictions of the risks associated with ICOs and cryptocurrencies.
“The persistently expanding exploitation of the crypto ecosystem by fraudsters is a significant threat to Main Street investors in the United States and Canada, and NASAA members are committed to combating this threat,” says Joseph P Borg, NASAA President and Director of the Alabama Securities Commission. “Despite a series of public warnings from securities regulators at all levels of government, cryptocriminals need to know that state and provincial securities regulators are taking swift and effective action to protect investors from their schemes and scams.”
In April 2018, NASAA organised a task force of its member state and provincial securities regulators to begin a coordinated series of investigations into ICOs and cryptocurrency-related investment products. Regulators identified many cryptocurrency-related products and as part of its work, the task force identified hundreds of ICOs in the final stages of preparation before being launched to the public. These pending ICOs were advertised and listed on ICO aggregation sites to attract investor interest. Many have been examined and some were determined to warrant further investigation. A number of these investigations are ongoing and others resulted in enforcement actions announced today.
“The actions announced today are just the tip of the iceberg,” says Borg, noting that the task force also found approximately 30,000 crypto-related domain name registrations, the vast majority of which appeared in 2017 and 2018.
A critical component of “Operation Cryptosweep” is raising public awareness of the risks associated with ICOs and cryptocurrency-related investment products. “Not every ICO or cryptocurrency-related investment is fraudulent, but we urge investors to approach any initial coin offering or cryptocurrency-related investment product with extreme caution,” Borg said.
For more information about ICOs and cryptocurrencies, watch NASAA’s video “Get in the Know About ICOs” or read NASAA’s Investor Advisories: “What to Know About ICOs” and “Be Cautious of the Crypto Investment Craze.”
