American NASAA Releases Update on Its Crackdown on Fraudulent Cryptos and ICOs

Hacks & Frauds 2 min, 3 sec READ

by Ricardo Carrasco

The North American Securities Administrators Association has given updates of 'Operation CryptoSweep', an investigation on crypto and ICO scams.

The North American Securities Administrators Association (NASAA) announced in a press release that it has over 200 active investigations on various crypto-related investment products and initial coin offerings on the United States and Canada as part of its ongoing ‘Operation Cryptosweep’ investigation.

The NASAA announced Operation Cryptosweep in May, and at the time it started with a total of 70 open investigations, focusing on operators of uncompliant securities offerings and unregistered ICOs that intend or intended to scam users without disclosing the risks associated with their investment products. According to the update, a total of 46 enforcement actions have been executed as a direct result of this international regulatory effort.

Joseph P. Borg, President of the NASAA and Director of the Alabama Securities Commission, said regarding the initiative,

State and provincial securities regulators are committing significant regulatory resources to protect investors from financial harm involving fraudulent ICOs and cryptocurrency-related investment products and also are raising awareness among industry participants of their regulatory responsibilities.

Beware of Compliant Frauds

Although Operation Cryptosweep mainly focuses on subjects like suspected securities fraud, Borg noted that NASAA investigators keep finding a wide range of potential state and provincial securities laws violations, like public offering of financial products that have not been properly registered. Borg added,

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. 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.

The NASAA announcement adds that even registered offerings could end up being fraudulent, so Borg advises investors to “perform their thorough due diligence” before investing in any cryptocurrency related investment products,

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, […] 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.