North American securities regulators increasingly focus enforcement actions on cryptos and ICOs

Maria Nikolova

State authorities have quickly learned that the cryptocurrency market is saturated with fraud, the latest NASAA enforcement report says.

The North American Securities Administrators Association (NASAA) today released its annual enforcement report, based on data from 2017. The document shows a reversal in a recent trend as more enforcement actions were taken in 2017 against unregistered individuals or firms than registered members of the securities industry. This reversal is attributed to the increased focus on cryptocurrency fraud investigations.

Unsurprisingly, enforcement personnel started increasingly focusing their efforts on cryptocurrencies, as the price of Bitcoin sharply increased from approximately $2,364 in July 2017 to nearly $20,000 in December 2017, and the market capitalization of all cryptocurrencies skyrocketed to more than $500 billion during the same time period. State authorities quickly learned the market was saturated with fraud. NASAA members began conducting swift investigations of suspect ICOs and other investments involving cryptocurrencies, and they started pursuing those enforcement actions in order to protect the investing public from harm.

For example, on December 20, 2017, the Texas State Securities Board secured an emergency action against USI-Tech Limited. This marked the first state enforcement action against a promoter of illegal and fraudulent investments tied to cryptocurrencies. Around the same time, the Securities Division of the North Carolina Department of the Secretary of State and the Texas State Securities Board started investigating BitConnect’s offer of investments in a cryptocurrency lending program.

NASAA U.S. members also reported a growing number of investigations of unregistered individuals. For 2017, participating jurisdictions reported 515 unregistered individuals were the subjects of pending investigations. This number has climbed steadily in recent years, increasing nearly 40% between 2015 and 2017.

“In light of recent state enforcement efforts against fraudulent activity involving cryptocurrencies, it would not be surprising to see a sustained high level of investigations and actions against unregistered individuals and firms in the coming months”, NASAA warns.

Let’s note that, in 2018, the efforts to put an end to cryptocurrency fraud accelerated. One of the results of these efforts is “Operation Cryptosweep”. In an announcement published in late August, NASAA said that over 200 active investigations of Initial Coin Offerings (ICOs) and cryptocurrency-related investment products are currently underway by regulators in the United States and Canada as part of “Operation Cryptosweep.” Since its launch in May, this campaign has led to 47 enforcement actions involving ICOs or cryptocurrency-related investment products. In the end of May, the number of such actions was 35.

Read this next

Retail FX

Texas Slaps Forex Scam with Cease and Desist Order

The Texas State Securities Board (TSSB) is following through on its promise to crack down on online trading fraud.

Industry News

JPMorgan Chase to open its UK neobank next week

JPMorgan Chase, the biggest US bank by total assets, will next week launch its City’s digital-only bank, which offers a range of savings and loan products under its ‘Chase’ brand in the UK.

Retail FX

TIOMarkets UK reports $78,461 in 2020 revenues

TIOmarkets’ FCA-regulated entity reported its financial results for the year ending December 31, 2020. The company posted a revenue figure that was nine times the amount it reported in the fiscal year of 2019.

Technology

Equiduct deploys big xyt’s data analytics for equity market structure

“Banks, asset managers, exchanges and market participants across the globe consistently rely on big xyt as an independent reference for equity market structure”.

Retail FX

BDSwiss partners with PayRetailers to address payment landscape in LATAM

PayRetailers’ suite of payment options via single seamless API integration will be available for BDS Markets Ltd. only.

Digital Assets

Coinbase applies for NFA license while awaiting SEC lawsuit

A license from the National Futures Association (NFA) would open the door to cryptocurrency derivatives trading.

Industry News

Euroclear acquires MFEX to enhance offering for fund distributors and fund managers

This transaction brings together two highly complementary businesses.

Industry News

Madoff Victim Fund sends $568 million to 31,000 victims of Ponzi scheme

Bernard L. Madoff used his position as chairman of BLMIS to steal billions from his clients.

Digital Assets

Revolut uses Bitcoin to Pay for its office space

Revolut, the company that is looking to build a financial super app, has used bitcoin to pay for its largest office space in Dallas, Texas to the flexible workspace provider WeWork.

<