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State Securities Regulators Launch 130 New Crypto Investigations

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State and provincial securities regulators have opened 130 new investigations into questionable cryptocurrency-related investment offerings and have 35 pending or completed enforcement actions since the beginning of 2019.

The North American Securities Administrators Association announced the new investigations Wednesday, which add to the more than 200 investigations already underway as part of NASAA’s Operation Cryptosweep initiative, launched last May.

Texas Securities Commissioner Travis Iles on Tuesday issued an emergency cease and desist order against New York-based Forex and Bitcoin Trader for touting on Craigslist Dallas a 900% return in 14 days. The firm deals in cryptocurrency investments, commodity-based derivatives and foreign currency trading.

Since its launch, the coordinated NASAA sweep has resulted in 85 pending or completed enforcement actions involving initial coin offerings or cryptocurrency-related investment products and approximately 330 inquiries or investigations by securities regulators from U.S. states and Canadian provinces.

“Recent headlines of potentially new cryptocurrency products and the near tripling in value of some cryptocurrencies and the sharp increase in market capitalization for all cryptocurrencies are again creating an environment that attracts white-collar criminals, bad actors and other promoters of illegal and fraudulent securities schemes,” said Michael Pieciak, NASAA President and Vermont commissioner of financial regulation, in announcing the new investigations. “Investors should be mindful of the hype and be aware of the risks when considering whether to jump into cryptocurrency-related investment products.”

NASAA also released Wednesday the third in its “Get in the Know” video series, featuring common crypto investment schemes and how to guard against becoming a victim.

In the case against Forex and Bitcoin Trader, the order states that an agent acting on behalf of the firms claimed to be a licensed broker that is authorized to trade in derivatives, securities and foreign currency, but according to the order the company is not registered with the Securities Commissioner as a dealer or agent.

The company is soliciting Texas investors with the promise that a principal investment of $2,000 will return $20,000 after 14 days, minus commissions and fees equal to 10% of returns.

According to the order, Forex and Bitcoin Trader is misleading investors by stating it has an insurance policy that backs client funds and a balance sheet with sufficient net capital to guarantee returns.

The company, however, is not disclosing any information about its capital or insurance policy, and it is failing to inform investors of the risks in trading cryptocurrency and foreign currency.

The Texas State Securities Board was the first state securities regulator to enter an enforcement order against a cryptocurrency firm, in December 2017, and to date the Securities Commissioner has entered 24 administrative orders involving 62 individuals and entities.

— Check out Crypto Exchanges Are Facing Biggest Regulatory Hurdle Yet on ThinkAdvisor.