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Retirement Planning > Social Security

200 Investigations Underway as Part of 'Cryptosweep': NASAA

By Melanie Waddell

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More than 200 active investigations of initial coin offerings and cryptocurrency-related investment products are underway by state and provincial securities regulators in the United States and Canada as part of the North American Securities Administrators Association’s ongoing “Operation Cryptosweep” initiative, which was launched in May.

The coordinated sweep has resulted in 47 enforcement actions involving ICOs or cryptocurrency-related investment products, NASAA reported Tuesday.

This includes the 35 announced in May, but does not include the three cease-and-desist orders announced by Colorado securities regulators on Monday.

Colorado Securities Commissioner Gerald Rome signed cease-and-desist orders to halt Bionic Coin, Sybrelabs Ltd. and Global Pay Net, which were promoting unregistered ICOs in Colorado as part of an investigation into what Rome said “has become a trend of allegedly fraudulent companies looking to make quick money.”

While enforcement investigations involve suspected securities fraud, Joe Borg, NASAA president and Alabama Securities Commission director, said that regulators were finding many other potential violations of state and provincial securities laws, including failure to properly register a product before it was offered to investors.

“State and provincial securities regulators are committing significant regulatory resources to protect investors from financial harm involving fraudulent ICOs and cryptocurrency-related investment products and also are raising awareness among industry participants of their regulatory responsibilities,” Borg said.

The vast majority of the enforcement activity involves the offer or sale of unregistered securities, according to NASAA.

Noting that not every ICO or cryptocurrency-related investment is a fraud, “it is important for individuals and firms selling these products to be mindful that they are not doing so in a vacuum; state and provincial laws or regulations may apply, especially securities laws,” Borg said.

He urged sponsors of such products to “seek the advice of knowledgeable legal counsel to ensure they do not run afoul of the law. Furthermore, a strong culture of compliance should be in place before, not after, these products are marketed to investors.”

Investors should also “be cautious when dealing with promoters who claim their ICO offering is exempt from securities registration but do not ask about your income, net worth or level of investing sophistication,” Borg added. “Do your homework and contact your state or provincial securities regulator with any concerns before parting with your hard-earned money — afterwards may be too late.”

— Check out SEC Quashes More Bitcoin ETF Pitches in Another Blow to Crypto on ThinkAdvisor.

Melanie Waddell

@Think_MelanieW

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