More than 200 crypto-related investigations are currently underway in the US and Canada by state and provincial securities regulators. The investigations are part of North American Securities Administrators Association (NASAA)’s “Operation Cryptosweep” initiative and involve cryptocurrency-related investment products and Initial Coin Offerings (ICOs), among others.
“The data is staggering,” said NASAA in a press release to Cryptovest. “Since NASAA announced its coordinated international sweep in May 2018, securities regulators from the United States and Canada have brought more than 45 enforcement actions against promoters of illegal and fraudulent cryptocurrency investment schemes.”
According to the regulations, if cryptocurrency investment products qualify as securities, they should be registered with the appropriate regulatory agencies, provided they haven’t qualified for an exemption. In many of the cases, promoters of these investments failed to obtain such licenses, and were concealing crucial information regarding the risks associated with crypto investments, the identities of program managers, and the physical location of the issuers. Some programs were recruiting unlicensed personnel to promote securities through multi-level marketing.
“While 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,” said NASAA President and Alabama Securities Commission Director Joseph P. Borg. “Sponsors of these products should 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.”
Borg added that although undergoing investigations are a part of NASAA’s “Operation Cryptosweep”, provincial and state regulators are uncovering other violations of local securities law. He also stated that while registration does offer some protections, fraudulent programs can still obtain a license, and therefore investors should research ICOs and cryptocurrency-related products before they invest in them.
“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 said. “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.”