What has happened?
Securities regulators in North America have launched dozens of investigations into potentially deceitful cryptocurrency investment products in one of the largest co-ordinated series of enforcement actions by state and provincial officials to crack down on cryptocurrency scams.
What does this mean?
Dubbed "Operation Cryptosweep", the move was announced on Monday during an event hosted by the North American Securities Administrators Association (NASAA), which helped co-ordinate the probes.
According to NASAA's press release, 44 jurisdictions throughout North America participated in the operation, which resulted in about 70 inquiries and investigations and 35 pending or completed enforcement actions related to initial coin offerings (ICOs) and cryptocurrencies since the beginning of the month.
More investigations are also under way, which may result in further enforcement actions.
Many NASAA members are also conducting public outreach initiatives to warn investors in their jurisdictions of the risks associated with ICOs and cryptocurrencies.
The operation was first proposed in April, when a task force comprising NASAA members was put together "to begin a co-ordinated series of investigations into ICOs and cryptocurrency-related investment products".
The task force identified "hundreds of ICOs in the final stages of preparation" that were advertised on ICO aggregation sites.
After examining many of these ICOs, the task force decided that some warranted further investigation.
“The actions announced today are just the tip of the iceberg,” said Joseph P. Borg, NASAA President and Director of the Alabama Securities Commission.
He noted that the task force also found about 30,000 crypto-related domain name registrations, the vast majority of which appeared in 2017 and 2018.
“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.
One example of enforcement action includes an emergency cease-and-desist orderissued by the Texas State Securities Board against Houston-based Wind Wide Coin.
The cryptocurrency investment scheme allegedly tried to dupe investors with fake endorsements from high-profile individuals and even posted photos of the UK's heir to the throne, Prince Charles, actress Jennifer Anniston and former Finnish Prime Minister Matti Taneli Vanhanen, but with fake names.
SEC Chariman Jay Clayton applauded the move, saying that this sends a strong warning to potential fraudsters in this space that "many sets of eyes are watching". He also repeated that when investors are offered and sold securities, whether through traditional channels or through an ICO on a sales-oriented website, state and federal securities laws apply.
"[State and securities] laws have applied to our securities markets for over 80 years. At their core, these laws require full and fair disclosures of material information about both the securities and the venture being funded. Unfortunately, some market participants seem to believe that the use of new technology provides a basis for ignoring the core principles of our securities laws," he said.
Founded in Kansas in 1919, NASAA is the oldest international investor protection organisation.
Its membership consists of 67 state, provincial and territorial securities administrators in the 50 states, the District of Columbia, the US Virgin Islands, Puerto Rico, Canada, and Mexico.
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