‘Operation Cryptosweep’ Continues With Hundreds Of ICOs Under Investigation by NASAA

The North American Securities Administrators Association (NASAA) has announced that regulators in the U.S and Canada are investigating over 200 Initial coin offerings (ICOs) and other cryptocurrency-related projects.

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The North American Securities Administrators Association (NASAA) has announced that regulators in the U.S and Canada are investigating over 200 Initial coin offerings (ICOs) and other cryptocurrency-related projects.

State and provincial regulators in the two countries launched the investigations as part of NASAA’s ongoing “Operation Cryptosweep” initiative. It is the largest coordinated regulatory crackdown targeting fraudulent crypto investment products.

According to the update, the crackdown began in May and has so far led to 46 enforcement actions against ICOs. Regulators also said that they have uncovered nearly 30,000 domain names related to crypto projects.

Quite unsurprisingly, most of these registrations took place towards the end of 2017, during the crypto boom that saw most coins skyrocket in value. For instance, Bitcoin (BTC) hit an all-time high of $20,000.

Joseph P. Borg, NASAA President and Director of Alabama Securities Commission said regulators had committed a lot of resources towards such initiatives. The aim of all these is to protect investors from fraudulent financial schemes.

He also said that the various programs are meant to raise awareness among industry players; especially about the need to play their part in regulatory enforcement.

Borg also pointed out that although Operation Cryptosweep involved probing projects suspected to have committed securities fraud, investigators have come across several other projects that constitute violations of state and provincial securities laws.

He gave an example of a crypto project failing to register a given product before offering it to potential investors.

Borg then offered some advice to firms and individuals seeking to offer ICO-related products. He said:

“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; state and provincial laws or regulations may apply, especially securities laws.”

He said that one way to ensure you do not break securities laws was for ICO sponsors to seek legal advice from knowledgeable counsel.

Furthermore, he felt that the industry needs to develop a culture of compliance. Such a culture will ensure that regulations are adhered to before, and not after marketing and offering the products to investors.

The regulators maintain that if any product offered in the crypto industry qualifies as securities, then it must be properly registered and ensure it complies with given regulatory guidelines. If not, such a project needs to apply for a registration exemption from a relevant regulatory agency.

Registration subjects the token offering to go through regulatory review. The process, to a large extent, provides investors with some degree of protection from potential financial harm.

It reminds investors that even registered offerings can turn out to be fraudulent. As such, investors need to always do their own due diligence before deciding to invest in a given ICO or related crypto product.

Borg asked investors to be cautious, especially when they come across ICO promoters who give the impression that the offering is exempt from registration.

Commenting on the issue of KYC and AML requirements, the NASAA president said that suspicious projects do not bother to ask investors about their income, their net worth or even how knowledgeable they are about the investment.

Worse still, they do not make any reference to the high risks investors face in cryptocurrency investment.

Scams have a few other hallmarks that investors should watch out for: they use fake addresses, subject investors to flashy marketing campaigns, and give guarantees on how much interest an investor would earn if they participate in the offering.

Source: NASAA

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